Miramar Hotel and Investment Company, Limited stock code: 71

Transcription

1 annual report 2013 Miramar Hotel and Investment Company, Limited stock code: 71

2 Contents 1 About Miramar 10 Milestones 12 Financial Highlights 14 Chairman s Statement 18 CEO s Message 30 Award Recognition 32 Biographical Details of Directors and Senior Management 40 Corporate Governance Report 50 Report of the Directors 79 Independent Auditor s Report 81 Consolidated Income Statement 82 Consolidated Statement of Comprehensive Income 83 Consolidated Balance Sheet 85 Balance Sheet 87 Consolidated Statement of Changes in Equity 89 Consolidated Cash Flow Statement 92 Notes to the Financial Statements 164 Group s Five-year Financial Summary 165 Group Properties 167 Notice of Annual General Meeting 170 Corporate Information

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4 About Miramar A dynamic and designoriented hospitality group providing lifestyle products Established in Hong Kong in 1957, Miramar Hotel and Investment Company, Limited (Miramar Group) is a hospitality group with a diversified service-oriented business portfolio comprising stylish hotels and serviced apartments, property rental, food and beverage, and travel services in Hong Kong and Mainland China. Miramar Group has been listed on the Hong Kong Stock Exchange since 1970 (HKEx Stock Code: 71) and is a member of Henderson Land Group.

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6 dynamic modern ity A sustainable, stylish and service-oriented hospitality group evolving to serve the needs of increasingly discerning guests. left Fluidity is in everything we do. right A crystal clear vision in delighting customers.

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8 contemporary master plan Blending architectural and technological innovation, Miramar Group s portfolio is authentic in origin and contemporary in design. left Landmark entrance to The Mira Hong Kong. right Mira Moon s fairy-tale inspired lanterns.

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10 creative masters Our specialty masters of various disciplines work their magic to create a host of well-seasoned experiences with savoir-faire and style. left Chef s Bjoern Panek and Jacky Chan, diverse in background and experts in their field, reflect Mira Dining s rich culinary team. right Service teams with an abundance of character, passion and style make for a distinguished ambience.

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12 distinctive me mories Our passion for detail creates and inspires genuine, emotional connections and guest experiences be it hotels, shopping, dining or travelling. left Mira Moon s guest services recount the hotel s bespoke Moon mythology. right The king of flowers Peony motif is vividly present throughout Mira Moon.

13 10 Milestones 1948 Miramar Hotel opened its doors in 1948 and became the first postwar hotel in Hong Kong Businessman Young Chi Wan took over the 192-room hotel property from a Spanish mission. Together with Dr Ho Sien Heng, they founded Miramar Hotel and Investment Company, Limited Miramar Hotel was the first hotel in Hong Kong to join an international hotel network, taking advantage of the worldwide marketing exposure Miramar Hotel and Investment Company, Limited went public The renowned Tsui Hang Village Restaurant began building a loyal following with authentic Cantonese cuisine. It continues to serve up the same great regional classics and tasty dim sum to this day With 8 years of listing on the local stock exchange, Miramar Hotel grew to over 1,300 rooms, making it the largest hotel in Southeast Asia at the time Miramar Express was launched The Group ventured into the property market with the opening of Miramar Shopping Centre and Miramar Tower which offer retail shopping and prime office space that remain a key revenue driver Acquired by Henderson Land Group The Group grew its property portfolio with the development of Knutsford Steps, adjacent to Miramar Shopping Centre Miramar Travel was launched Miramar Hotel was re-branded as The Mira Hong Kong and 2 years later, it became the first hotel in Hong Kong to join the Berlin-based cutting-edge collective, Design Hotels network, leading the way for lifestyle living, and paving the way for the Mira brand The Group introduced Hong Kong s Michelin Star Cantonese Restaurant, Cuisine Cuisine to the Mainland Miramar Group marked its 55th anniversary with the opening of Mira Mall, the launch of contemporary izakaya Zanzo, and the extension of Cuisine Cuisine brand in Wuhan.

14 11 Annual Report 2013 Miramar Hotel and Investment Company, Limited 2013 Miramar Group launched its second Design Hotels member property, Mira Moon, in Wan Chai on 1 November further reinforcing its stylish, lifestyle-oriented brand. A fun and casual Korean restaurant, School Food, made its debut in August and a third outlet of the popular Tsui Hang Village Cantonese restaurant chain was opened in Causeway Bay in May.

15 12 Financial Highlights Turnover HK$ million Underlying profit attributable to shareholders of the Company HK$ million Underlying earnings per share HK$ 2,112 2,496 2,974 3, , period/year ended 31 December 2009 period/year period/year ended ended December December For the year ended 31 December HK$ million HK$ million Turnover Property rental Property development and sales Hotel and serviced apartment Food and beverage operation Travel operation 1,221 1,120 Apparel operation Total turnover 3,044 2,974 Profit attributable to shareholders of the Company 1,278 1,377 Underlying profit attributable to shareholders of the Company (note) Note: The effect of the net increase/decrease in fair value of investment properties (net of deferred tax and non-controlling interest) was excluded in the calculation of the underlying profit attributable to shareholders of the Company.

16 13 Annual Report 2013 Miramar Hotel and Investment Company, Limited Dividend per share HK$ Shareholders equity HK$ million Net asset value attributable to shareholders of the Company per share 12,136 HK$ 11, , ,102 8, period/year ended 31 December period/year ended period/year ended December 2009 (restated) December 2009 (restated) Notes: (1) In August 2009, the Company changed its financial year ended date from 31 March to 31 December. Hence, the figures for the period ended 31 December 2009 covered the nine months period from 1 April 2009 to 31 December (2) The figures for the period ended 31 December 2009 has been restated to reflect the effect of early adoption of the amendments to HKAS 12, Income taxes in For the year ended 31 December HK$ HK$ Earnings per share Underlying earnings per share Dividend per share At 31 December 2013 HK$ million 2012 HK$ million Consolidated net asset attributable to shareholders of the Company 12,136 11,072 HK$ HK$ Consolidated net asset value attributable to shareholders of the Company per share

17 14 Chairman s Statement The Group s core businesses performed respectably Dear Shareholders On behalf of your Board, I am pleased to present my report on the operations of the Group for the financial year ended 31 December Turnover, Profit and Net Asset Value Attributable to Shareholders The Group s turnover rose by 2% to approximately HK$3,044,000,000 for the financial year ended 31 December 2013 (the Reporting Period ) when compared to the financial year ended 31 December 2012 (the Last Corresponding Period ) (2012: HK$2,974,000,000). Profit attributable to shareholders decreased by 7% year-on-year to approximately HK$1,278,000,000 (2012: HK$1,377,000,000). Excluding the net increase in the fair value of the Group s investment properties, underlying profit attributable to shareholders grew by 7% to approximately HK$478,000,000 (2012: HK$448,000,000). Basic underlying earnings per share rose by 7% to HK$0.83 compared to the Last Corresponding Period (2012: HK$0.78).

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19 16 Chairman s Statement The Group owns a portfolio of the most precious property assets and will continue to enhance its value and stable income stream Business Overview The global economy s slow recovery continued and China s introduction of austerity measures and tighter fiscal controls tapered consumption growth. The Group s core businesses of Hotel and Serviced Apartment, Property Rental, Food and Beverage, and Travel managed to perform respectably. The Group focused on delivering our long-term goals of asset and product enhancement, continually responding to our customers needs, improving service with prudent expansion, in line with our design-oriented lifestyle brand identity. During the year, the Group responded positively despite the adverse conditions in business and leisure travel with the opening of the new hotel Mira Moon, while the Hotel and Serviced Apartment business also delivered a satisfactory result. The Property Rental business benefitted from its long-term tenancy agreements and high-value tenant portfolio, while continuing to enhance the quality of its properties, and both its revenue and occupancy rates grew steadily. The result of the Group s multi-brand Food and Beverage business improved as it continued to open new specialty outlets to cater to different tastes and further improved products and services in its portfolio of contemporary restaurants. The Travel business recorded satisfactory results, boosted by a stable operating environment in the overall outbound travel sector and increased online sales. The Group evaluated the prospects of its Apparel business in light of increasing losses and made a decision during the second half of the year to discontinue this business at the natural expiry of distribution contract terms in December Corporate Governance and Social Responsibility The Group places great emphasis on ensuring that it adheres to sound corporate governance and corporate social responsibility practices. The Group regards the maintenance of a pre-eminent board of directors, sound internal controls and accountability to its shareholders as fundamental to good governance.

20 17 Annual Report 2013 Miramar Hotel and Investment Company, Limited Commercial growth and corporate social responsibility are mutually important imperatives for the Group. The Group actively pursues meaningful sustainability and social responsibility initiatives and closely partners in the initiatives of our substantial shareholder, Henderson Land Development Company Limited. During the year, the Group received several accolades including Indoor Air Quality Certification from the Hong Kong Environmental Protection Department, Hong Kong Green Award from the Green Council, and Excellence in Facility Management from the Hong Kong Institute of Facility Management. Business Outlook The Group will continue to invest in the further development of its core businesses as it evolves into a more synergistic, stylish and service-oriented hospitality group with attributes that truly differentiate it in the market. The Group owns a portfolio of the most precious property assets and will continue to do its best to enhance its value and stable income stream. With a strong balance sheet, financial liquidity, a highly experienced management team, unique branding and almost six decades of business experience, I am confident that the Group is well positioned to meet all the anticipated challenges and opportunities of 2014 and to continue to deliver sustainable growth in returns to our shareholders. Re-designation of Directors Due to my busy schedule, I have tendered my resignation as Chairman and member of both of the Remuneration Committee and Nomination Committee and I am glad to remain as Non-executive Director. At the same time, the Board of Directors has approved at the recommendation of the Nomination Committee that I will be re-designated as a Non-executive Director, and Mr. Lee Ka Shing be re-designated as the Chairman and Chief Executive Officer and will also be appointed as a member of the Remuneration Committee and the Chairman of the Nomination Committee with effect from 12 June 2014, being the business date following the forthcoming Annual General Meeting scheduled to be held on 11 June I wish to thank all my fellow directors for their trust and support during my tenure as Chairman. Acknowledgement I would like to take this opportunity to express my gratitude to my fellow directors for their guidance and to all staff for their dedication and hard work. LEE SHAU KEE Chairman Hong Kong, 18 March 2014

21 18 CEO s Message Strengthening our position as a lifestyle hospitality group The Group delivered a respectable performance in 2013 against a backdrop of challenging economic conditions. We accomplished this by leveraging the solid Miramar reputation, reinforcing our unique design-oriented lifestyle brand and exploiting our ability to adapt swiftly to changing business conditions. Our four core business units, Hotel and Serviced Apartment, Property Rental, Food and Beverage, and Travel all performed satisfactorily during the year as the Group continued to consolidate its position as a strong and sustainable, stylish service-oriented hospitality group. In response to the disappointing returns and outlook in the Apparel business, management took a strategic decision to exit this business line at the end of 2013 with the natural expiry of the master distribution contracts.

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24 21 Annual Report 2013 Miramar Hotel and Investment Company, Limited Hotel and Serviced Apartment Business Delivering enhanced value propositions with stylish products and services The Group s Hotel and Serviced Apartment business was impacted by subdued global economic conditions coupled with an increasingly competitive landscape. Management responded proactively by improving its customer-centric approach through the introduction of stylish new products and improved services, thereby enhancing its service-oriented value proposition. The division experienced a slight decline in average daily rate (ADR) and a slight reduction in EBITDA (earnings before interest, tax, depreciation and amortization) to approximately HK$223,800,000. The highlight of the year was the opening in November of Mira Moon, a unique 91-room boutique hotel located in Hong Kong s bustling Wan Chai district, which epitomizes our positioning as a premier lifestyle-oriented hospitality group. We consider the design-oriented hotel market featuring high quality, innovative guest services and technology as an attractive opportunity for the Group and we are currently planning the launch of a third property in this segment. We also focused on increasing our corporate account business and introduced the Mira Plus loyalty program, which extends to our malls, and food and beverage operations.

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26 23 Annual Report 2013 Miramar Hotel and Investment Company, Limited Property Rental Business Landmark location attracting premium tenants The Group s prestigious portfolio of commercial properties in Hong Kong and Mainland China again performed strongly. Our landmark properties in Tsim Sha Tsui include two shopping malls and an office tower spanning approximately 500 meters of prime space in Tsim Sha Tsui s Golden Mile shopping district. Despite the ongoing global economic uncertainties, the Group was able to benefit from existing multi-year tenancy agreements, a quality tenant portfolio with our ability to attract some of the world s top brands, and the overall enhancement of our facilities in order to achieve growth in revenues of 7% and EBITDA of 8% in Miramar Shopping Centre and Mira Mall Subdued and cautious consumer spending placed pressure on retailers in all categories, resulting in marginal tapering in the rental growth rate. Despite this, the Group s shopping malls, Miramar Shopping Centre (MSC) and Mira Mall, remain resilient with a portfolio of quality tenants. Occupancy rate for MSC remained at 97% during 2013, while an increase in average rental unit rate of 6% over last year was achieved. Benefitting from a prime location, existing prestigious lifestyle brand tenants and the high throughput of shoppers, our malls continued to attract some of the best known names in the fashion and luxury goods sector as new tenants. Overall, a change in the tenant mix and the availability of more space following the completion of enhancements to our malls during the previous year resulted in an overall increase in occupancy. In pursuit of our commitment to offer a more enriched lifestyle experience to customers and better engage tenants, we introduced several unique marketing initiatives during the year. These included live musical performances and special themed holiday events, such as the creation of our own character for Easter. We are also moving towards a finer balance in our trade mix with more quality luxury goods brands and a diverse range of fine dining cuisines, including Chinese, Japanese, Korean and Italian. Miramar Tower Miramar Tower experienced a slight decline in occupancy rate to 95%, while the average rental unit rate increased by 19% year-on-year. The impact of a lower growth momentum of the office rental market was negligible and the Group benefitted from long-term rental agreements we have in place with quality tenants. The proximity of Miramar Tower to major shopping malls, diverse dining establishments and parking facilities helped to attract and retain a strong portfolio of quality tenants.

27 24 CEO s Message

28 25 Annual Report 2013 Miramar Hotel and Investment Company, Limited Food and Beverage Business Diverse culinary delights, popular contemporary dining The Group s vision for its Food and Beverage business is to be the most preferred brand in every cuisine that we serve to our customers. Our long-standing, multi-brand, multi-culinary approach to contemporary dining continues to prove a winning strategy as the Group adjusts its offering to appeal to an increasingly broad range of customers, tastes and trends. Our wide selection of dining outlets includes a range of popular Chinese, French, Italian and Japanese restaurants of varying customer price points. During the year, we opened a Tsui Hang Village Cantonese restaurant in Causeway Bay, the third in this popular chain, our French Window Brasserie and Bar was re-launched at ifc Mall, and we relocated our famed Yunyan Sichuan restaurant to Times Square, under a new identity as Yun Yan. Also in Times Square, we opened the first School Food, a fun and casual international restaurant chain specializing in popular Korean food. As our Food and Beverage business has not yet reached profitability, we are encouraged with the overall progress in the past year with revenue up by 12% and losses reduced. We are confident this trend toward profitability will continue as the Group plans to carefully manage challenges such as high costs of renovation and labor in order to increase our value proposition for our customers.

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30 27 Annual Report 2013 Miramar Hotel and Investment Company, Limited Travel Business Increasing overseas vacation travel drives expansion With demand for travel services continuing to grow, the Group s revenue from travel related business grew substantially. The percentage of customers making online reservations also increased significantly. The business achieved revenue growth of 9% to approximately HK$1,220,900,000 and EBITDA of approximately HK$56,600,000 as more vacationers chose to travel overseas. This was characterized by a steady increase in the outbound travel market, particularly in the high-end vacation segment.

31 Business Outlook Recognizing that economic growth is likely to remain steady, the Group will remain both flexible and prudent in our expansion activities, focus on our core businesses and customers and leverage our competitive edge while carefully monitoring the high costs associated with doing business in Hong Kong as well as the high expectations of our customers. The Group will continue with its asset enhancement program to increase value and shoppers experience in our malls. This is aimed at enhancing and enlivening our malls under a single brand entity to better demonstrate the Group s lifestyle focus and increase our value proposition. In our Hotel and Serviced Apartment business, we are in the advanced planning stages of a third Mira brand hotel following the success of Mira Moon as we seek to provide visitors with more meaningful lifestyle choices during their stay in Hong Kong. The Group will continue to closely monitor our Food and Beverage business and make strategic adjustments to service, product and pricing in line with market conditions. As evidenced by the successful introduction of School Food, we will also carefully expand our offering where it can enhance the Group s value proposition. Encouraged by the results in Travel business, the Group will continue to target the outbound market and will further focus on the fast-growing online reservations and sales market. The Group s professional management team will continue the momentum of our brand, service and product development as we capitalize on market opportunities and strengthen our position as the leading stylish, service-oriented hospitality group. The Group will be able to deliver stable and healthy growth with thorough planning and asset enhancement programs. LEE KA SHING CEO Hong Kong, 18 March 2014

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33 30 Award Recognition distinctive and diversified business

34 31 Annual Report 2013 Miramar Hotel and Investment Company, Limited MIRAMAR GROUP Grand Prize Award, Manpower Developer Award Scheme, Employees Retraining Board (ERB) HOTEL AND SERVICED APARTMENT Mira Moon Best Hotel Interior Hong Kong, The Asia Pacific Hotel Awards China Green Building Design Label: 3-Star rating The Mira Hong Kong Recommended Hotel, Michelin Guide Hong Kong & Macau 2013 Trip Advisor Certificate of Excellence Award 2013 WHISK (The Mira Hong Kong) Recommended Restaurant, Michelin Guide Hong Kong & Macau 2013 property rental Miramar Shopping Centre Excellence in Facility Management Award 2013, The HK Institute of Facility Management (HKIFM) Hong Kong Green Award 2013 Green Management Award (Corporation) Service Provider Silver, Green Council Hong Kong Green Award 2013 Green Purchaswi$e Award (Corporation) Silver, Green Council FOOD AND BEVERAGE Assaggio Trattoria Italiana (Wan Chai) Recommended Restaurant, Michelin Guide Hong Kong & Macau 2013 Cuisine Cuisine (Hong Kong) 1 Star Restaurant, Michelin Guide Hong Kong & Macau 2013 Hide-Chan Ramen Recommended Bib Gourmand Restaurant, Michelin Guide Hong Kong & Macau 2013 Tsui Hang Village (Tsim Sha Tsui) Recommended Restaurant, Michelin Guide Hong Kong & Macau 2013 Yun Yan 100 Top Tables 2013, South China Morning Post (SCMP) TRAVEL Miramar Travel Top Agent Award, Cathay Pacific Airways and Dragonair Best Trade Partner 2013, South African Tourism Taiwan Tourism Award 2013, Taiwan Tourism Bureau Best Tour Operator 2013, Turkish Airlines Hong Kong GIT Sales Contribution Award 2013, Air China

35 32 Biographical Details of Directors and Senior Management Directors Dr the Honourable LEE Shau Kee, GBM, DBA (Hon), DSSc (Hon), LLD (Hon) Aged 85. Dr Lee was appointed director of the Company in 1993 and has been the Chairman of the Company since 8 August Dr Lee will resign as Chairman and member of both of the Remuneration Committee and Nomination Committee and will be re-designated as Non-executive Director of the Company with effect from 12 June He has been engaged in property development in Hong Kong for more than 55 years. He is the founder and the Chairman and Managing Director of Henderson Land Development Company Limited ( Henderson Land ) and Henderson Investment Limited ( Henderson Investment ), the Chairman of The Hong Kong and China Gas Company Limited, the Vice Chairman of Sun Hung Kai Properties Limited as well as a non-executive director of Hong Kong Ferry (Holdings) Company Limited, all of which are listed companies. He previously served as an independent non-executive director of The Bank of East Asia, Limited, a listed company, until his resignation on 24 April Dr Lee was awarded Grand Bauhinia Medal by the Government of the Hong Kong Special Administrative Region in He is a director of Multiglade Holdings Limited ( Multiglade ), Higgins Holdings Limited ( Higgins ), Threadwell Limited ( Threadwell ), Aynbury Investments Limited ( Aynbury ), Henderson Land, Henderson Development Limited ( Henderson Development ), Hopkins (Cayman) Limited ( Hopkins ), Riddick (Cayman) Limited ( Riddick ) and Rimmer (Cayman) Limited ( Rimmer ) which have discloseable interests in the shares of the Company under the provisions of Part XV of the Securities and Futures Ordinance as at 31 December He is the father of Mr Lee Ka Shing. Dr David SIN Wai Kin, DSSc (Hon) Aged 84. Dr Sin was appointed director of the Company in 1974 and has been a Vice Chairman of the Company since He is currently a member of the Audit Committee, Remuneration Committee and Nomination Committee of the Company. Dr Sin has a plenitude of experience in the businesses of jewelry, property development, property rental, hotel operation, and banking and finance. He is the Chairman of Myer Jewelry Manufacturer Limited. He previously served as a director of New World Development Company Limited until 1 March He is also a director of certain subsidiaries of the Company.

36 33 Annual Report 2013 Miramar Hotel and Investment Company, Limited Mr LEE Ka Shing Aged 42. Mr Lee was appointed director of the Company in 2004 and has been actively involved in formulating the Group s corporate development strategies and directions. On 1 August 2006, he was appointed as Managing Director of the Company, with the title changed to Chief Executive Officer on 7 June Mr Lee will be re-designated as the Chairman and Chief Executive Officer and will also be appointed as a member of the Remuneration Committee and the chairman of the Nomination Committee of the Company with effect from 12 June He has been in charge of corporate policy formulation and schematization, as well as promoting the Group s business development and enhancing its competitiveness and status in the industry. He was educated in Canada. He is the Vice Chairman of Henderson Land, Henderson Investment and a non-executive director of The Hong Kong and China Gas Company Limited, all of which are listed companies. He is also a Vice Chairman of Henderson Development. Mr Lee is a Committee Member of the 12th Beijing Committee, and previously a Committee Member of the 10th Guangxi Zhuangzu Zizhiqu Committee and of the 10th Foshan Committee, of the Chinese People s Political Consultative Conference, PRC. Henderson Land and Henderson Development have discloseable interests in the shares of the Company under the provisions of Part XV of the Securities and Futures Ordinance as at 31 December He is also a director of certain subsidiaries of the Company. Mr Lee is the son of Dr Lee Shau Kee. Dr Patrick FUNG Yuk Bun Aged 66. Dr Fung was appointed director of the Company in He obtained his MBA degree from University of Toronto in 1973, and was awarded an Honorary Doctor of Business Administration by the Hong Kong Polytechnic University in 2001 and an Honorary Doctor of Laws by the University of Toronto in Dr Fung joined Wing Hang Bank in 1976 and was appointed Director in He was appointed Chief Executive of the Bank in 1992, and then Chairman and Chief Executive in April Dr Fung is an independent non-executive director of The Link Management Limited, the manager of The Link Real Estate Investment Trust. He is a member of the Court of the Hong Kong Polytechnic University, a member of the Court of the Hong Kong University of Science and Technology, Vice President of the Hong Kong Institute of Bankers and a member of Board of Governors of The Hong Kong Philharmonic Society Limited. He is also a director of certain subsidiaries of the Company. Mr Dominic CHENG Ka On Aged 64. Mr Cheng was appointed director of the Company in He is currently a member of the Audit Committee of the Company. Mr Cheng has extensive practical experience in corporate management and is also an executive director of King Fook Holdings Limited and the Managing Director of the Onflo International Group of Companies. He is also a director of certain subsidiaries of the Company.

37 34 Biographical Details of Directors and Senior Management Mr Richard TANG Yat Sun, MBA, BBS, JP Aged 61. Mr Tang was appointed director of the Company in He is an MBA graduate from the University of Santa Clara, California, U.S.A., and a holder of Bachelor of Science degree in Business Administration from Menlo College, California, U.S.A. He is currently the Chairman and Managing Director of Richcom Company Limited, Vice Chairman of King Fook Holdings Limited, an independent non-executive director of Hang Seng Bank Limited and Wheelock and Company Limited and a director of various private business enterprises. He is an Advisor of Tang Shiu Kin and Ho Tim Charitable Fund. He is also a director of certain subsidiaries of the Company. Mr Colin LAM Ko Yin, FCILT, FHKIoD Aged 62. Mr Lam was appointed director of the Company in He holds a Bachelor of Science (Honours) degree from the University of Hong Kong and has over 40 years experience in banking and property development. He is the Deputy Chairman of The University of Hong Kong Foundation for Educational Development and Research and a Director of Fudan University Education Development Foundation. Mr Lam was awarded an Honorary University Fellowship by The University of Hong Kong in He is a Fellow of The Chartered Institute of Logistics and Transport in Hong Kong and a Fellow of The Hong Kong Institute of Directors. He is also the Chairman of Hong Kong Ferry (Holdings) Company Limited, the Vice Chairman of Henderson Land and Henderson Investment as well as a non-executive director of The Hong Kong and China Gas Company Limited, all of which are listed companies. Mr Lam is a director of Henderson Development, Multiglade, Higgins, Threadwell, Aynbury, Hopkins, Riddick and Rimmer. Multiglade, Higgins, Threadwell, Aynbury, Henderson Land, Henderson Development, Hopkins, Riddick and Rimmer have discloseable interests in the shares of the Company under the provisions of Part XV of the Securities and Futures Ordinance as at 31 December He is also a director of certain subsidiaries of the Company. Mr Eddie LAU Yum Chuen Aged 67. Mr Lau was appointed director of the Company in He has over 40 years experience in banking, finance and investment. He is also an executive director of Henderson Land as well as a non-executive director of Hong Kong Ferry (Holdings) Company Limited, both of which are listed companies. He previously served as an executive director of Henderson Investment, a listed company, until his retirement on 9 June Henderson Land has discloseable interests in the shares of the Company under the provisions of Part XV of the Securities and Futures Ordinance as at 31 December He is also a director of certain subsidiaries of the Company.

38 35 Annual Report 2013 Miramar Hotel and Investment Company, Limited Mr Norman HO Hau Chong, BA, ACA, FCPA Aged 58. Mr Ho was appointed director of the Company in He is a member of the Institute of Chartered Accountants in England and Wales, and a Fellow of the Hong Kong Institute of Certified Public Accountants. He is an executive director of Honorway Investments Limited and Tak Hung (Holding) Company Limited and has over 32 years experience in management and property development. He is also a director of Vision Values Holdings Limited, as well as an independent non-executive director of Hong Kong Ferry (Holdings) Company Limited, Lee Hing Development Limited and Shun Tak Holdings Limited. He previously served as an independent non-executive director of Starlight International Holdings Limited until his retirement on 26 August 2013, CITIC Pacific Limited until his resignation on 12 May He is also a director of certain subsidiaries of the Company. Mr Howard YEUNG Ping Leung Aged 57. Mr Yeung was appointed director of the Company in 2000 and was redesignated as independent non-executive director of the Company in December He has extensive experience in the businesses of property development, hotel operation and jewelry. He is also a director and the Chairman of King Fook Holdings Limited and an independent non-executive director of New World Development Company Limited. Mr Thomas LIANG Cheung Biu, BA, MBA Aged 67. Mr Liang was appointed director of the Company in 2004 and was re-designated as independent non-executive director of the Company in December He holds a Bachelor degree in Economics from the University of California, Berkeley and a Master degree in Business Administration from Columbia University. Mr Liang has extensive experience in financial management, corporate finance, banking, real estate development and equity investment. He is also the Group Chief Executive of Wideland Investors Limited and an independent non-executive director of New World Development Company Limited. Mr WU King Cheong, BBS, JP Aged 63. Mr Wu was appointed as an independent non-executive director of the Company in He is the Life Honorary Chairman of the Chinese General Chamber of Commerce, the Honorary Permanent President of the Chinese Gold & Silver Exchange Society and the Permanent Honorary President of the Hong Kong Securities Association Ltd. He is an executive director of Lee Cheong Gold Dealers Limited. He is also an independent nonexecutive director of Yau Lee Holdings Limited, Henderson Land, Henderson Investment and Hong Kong Ferry (Holdings) Company Limited, all of which are listed companies. Mr Wu previously served as an independent non-executive director of Chevalier Pacific Holdings Limited, a listed company, until 27 October Henderson Land has discloseable interests in the shares of the Company under the provisions of Part XV of the Securities and Futures Ordinance as at 31 December 2013.

39 36 Biographical Details of Directors and Senior Management Mr Alexander AU Siu Kee, OBE, ACA, FCCA, FCPA, AAIA, FCIB, FHKIB Aged 67. Mr Au was appointed as an independent non-executive director on 17 January 2005 and re-designated as a non-executive director of the Company on 7 November Mr Au is a well-known banker in Hong Kong and has more than 32 years experience in local and international banking business, having been the Chief Executive of Hang Seng Bank Limited (from October 1993 to March 1998) and of Oversea-Chinese Banking Corporation Limited in Singapore (from September 1998 to April 2002). He is currently an independent non-executive director of Henderson Land (as re-designated on 18 December 2012) and The Wharf (Holdings) Limited and a non-executive director of Hong Kong Ferry (Holdings) Company Limited, all of which are listed companies. He is the chairman and non-executive director of Henderson Sunlight Asset Management Limited, the manager of the publicly-listed Sunlight Real Estate Investment Trust. Mr Au previously served as an independent non-executive director of Wheelock and Company Limited, a listed company, until 22 October An accountant by training, Mr Au is a Chartered Accountant as well as a Fellow of The Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants. Henderson Land has discloseable interests in the shares of the Company under the provisions of Part XV of the Securities and Futures Ordinance as at 31 December Dr Timpson CHUNG Shui Ming, GBS, JP, DSSc (Hon) Aged 62. Dr Chung was appointed as an independent non-executive director of the Company in Dr Chung obtained a bachelor s degree in science from the University of Hong Kong and a master s degree in business administration from the Chinese University of Hong Kong, and was awarded a Doctor of Social Sciences honoris causa by the City University of Hong Kong. He is a fellow member of Hong Kong Institute of Certified Public Accountants. He is a member of the National Committee of the 10th, 11th and 12th Chinese People s Political Consultative Conference. Currently, Dr Chung is an independent non-executive director of China Unicom (Hong Kong) Limited, Glorious Sun Enterprises Limited, China Overseas Grand Oceans Group Limited, China Everbright Limited, China Construction Bank Corporation and Henderson Land, all of which are listed on The Stock Exchange of Hong Kong Limited. He is also an independent director of China State Construction Engineering Corporation Limited, listed on the Shanghai Stock Exchange. Formerly, Dr Chung was the Chairman of the Council of the City University of Hong Kong, the Chairman of the Hong Kong Housing Society and the Chief Executive of the Hong Kong Special Administrative Region Government Land Fund Trust. He was previously an independent director of China Everbright Bank Company Limited (listed on the Shanghai Stock Exchange). He previously served as an independent non-executive director of Nine Dragons Paper (Holdings) Limited, a listed company, until his retirement on 3 March Henderson Land has discloseable interests in the shares of the Company under the provisions of Part XV of the Securities and Futures Ordinance as at 31 December 2013.

40 37 Annual Report 2013 Miramar Hotel and Investment Company, Limited Senior Management Mr Felix SEE Chi Kwok Aged 44. Mr See joined the Group in May 2012 as Chief Operations Officer. He holds a Bachelor s Degree from the University of Hong Kong and a Master s Degree in Business Administration from the Hong Kong University of Science and Technology. Mr See is a seasoned executive and has more than 20 years experience in the information technology industry, having held various senior management positions within Hewlett-Packard in the Greater China region, with responsibilities covering sales, business development and general management. Mr See has a proven track record in business turnarounds and possesses strong ability to manage sizable companies. He addresses both shortterm performance and long-term sustainability of a company through the cultivation of performance culture and the establishment of an effective organization. He has extensive experience in charting future strategies of a company to fuel business growth, and has strong network with executives in Hong Kong, China and Taiwan. Prior to joining the Group, Mr See was Executive Director and Deputy Chief Executive Officer of Tradelink Electronic Commerce Limited. Mr Allen LIM Kean Kee Aged 53. Mr Lim joined the Group in May 2012 as Chief Financial Officer and appointed as the Joint Company Secretary in August He holds a Master of Business Administration from the Brunel University/Henley Management College, U.K. and is a Fellow of The Chartered Institute of Management Accountants, U.K. Mr Lim has over 30 years of experience working closely with senior business leaders to achieve strategic, business and financial objectives in the Asia Pacific region; transforming finance to value creation function; leading mergers and acquisitions, due diligence and investment projects; and enhancing operational and process efficiency. Mr Lim joined the Group from HSBC Bank, where he was the Head of Management Information, Planning and Analysis covering all HSBC businesses in Hong Kong, and was the Asia Pacific Chief Financial Officer of HSBC Asset Management. During the earlier part of his career, he was with American Express, National Australia Bank and spent some time as a management consultant. Mr Patrick CHEANG Kwok Kee Aged 45. Mr Cheang joined the Group in November 2012 as Director of Internal Audit. He holds a Bachelor s Degree in Finance from The University of Hong Kong and Diploma of Business Law from the University of Shenzhen. Mr Cheang has over 15 years of auditing and risk management expertise with extensive experience in property related areas. Prior to joining the Group, Mr Cheang worked at The Link Management Limited as Head of Risk Management & Compliance and Head of Internal Audit and before that, he was the Supervising Consultant (Group Audit) for Jardine Matheson Limited.

41 38 Biographical Details of Directors and Senior Management Mr Clement WU Kim Man Aged 45. Mr Wu joined the Group in November 2012 as Business Unit Head of Asset Management. He is a Registered Professional Surveyor and Authorized Person in Hong Kong, and holds a Master of Business Administration (Financial Services) from The Hong Kong Polytechnic University. He is also a Member of the Chartered Institute of Arbitrators in U.K., a Panel Member of Appeal Tribunal (Buildings) in Hong Kong and a Registered BEAM Professional of Hong Kong Green Building Council. Mr Wu has over 20 years of experience in the property and construction industry with expertise in asset enhancement. He has managed a number of large scale major renovations and value-added projects across both residential and commercial sectors in Hong Kong. Prior to joining the Group, Mr Wu was the General Manager (Project and Planning Department) of The Link Management Limited. Mr Kenneth SORENSEN Aged 48. Mr Sorensen joined the Group in November 2012 as Business Unit Head of Hotels and Serviced Apartments. A Danish national and holding a Degree in Hospitality Management from EHL in Lausanne, Mr Sorensen is a well-traveled multi-cultural seasoned executive with more than 25 years of sales, marketing, business development, operations, asset management and general management experiences, the last 15 in the Asia Pacific region. He has held key leadership roles in the main disciplines of the hospitality industry. Prior to joining the Group, he was at the helm of Onyx Hospitality Group North Asia. Mr Martin CHUNG Shui Ming Aged 49. Mr Chung joined the Group in April 2010 as General Manager of The Mira Hong Kong. In May 2012 he was appointed as Business Unit Head of Food and Beverage. He holds a Bachelor s Degree in Hospitality Management from the University of Lausanne and a Bachelor s Degree in Business Administration from La Neuveville, Switzerland. Mr Chung has over 20 years of experience in hospitality management spanning Asia, Europe and the Middle East, specialising in food and beverage. Prior to joining the Group, he was Senior Vice-President (Food and Beverage) of Atlantis, The Palm Dubai. Ms Amy LEE Mei Yee Aged 45. Ms Lee joined the Group in January 2013 as Director of Group Marketing & Corporate Communications. Ms Lee s rich marketing experience has centered around creating, sustaining and rejuvenating brands. Her experience in the property and lifestyle industry was well advanced with her involvement in precinct creation, new visual identity design, repositioning, launch and marketing of the many premium multi-purpose commercial complexes comprising grade A offices, malls, serviced apartments and hotels owned by Swire Properties in China and Hong Kong.

42 39 Annual Report 2013 Miramar Hotel and Investment Company, Limited Mr Anthony HO Wai Cheong Aged 44. Mr Ho joined the Group in December 2012 as Director of Group Information Technology. He holds a Bachelor s Degree in Computer Engineering and a Master of Business Administration from The University of Hong Kong. Mr Ho has more than 20 years of experience in the information technology industry. He has held various leadership positions in global & local companies in the field and has a great depth of technical and management knowledge especially in project management and management of change. He is also well experienced in IT strategies and operations, and partnering with business units to provide online customer service and support. Prior to joining the Group, Mr Ho was the Chief Information Officer of Tradelink Electronic Commerce Limited. Mr Mike CHAN Tin Fun Aged 49. Mr Chan joined the Group in April 2009 as Director of Group Procurement. He holds a Bachelor of Arts (Hons) Degree in Hospitality and Tourism Management from University of Birmingham; a Diploma in Marketing and International Business, and a Diploma in Company Management, both from the Chinese University of Hong Kong. Mr Chan has extensive experience in the field, having worked at various reputable companies in Asia Pacific, China and Hong Kong, including but not limited to Shangri-la, Ritz Carlton Hotel, Walt Disney and Hong Kong Jockey Club.

43 40 Corporate Governance Report The Company is committed to maintaining a high standard of corporate governance. During the year ended 31 December 2013, the Company has complied with the code provisions set out in the Corporate Governance Code contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules ). Board of Directors The Board of Directors (the Board ) currently comprises fourteen members, of whom six are executive directors, three non-executive directors and five independent non-executive directors, as details below: Executive Directors: Dr LEE Shau Kee Mr LEE Ka Shing Mr Richard TANG Yat Sun Mr Colin LAM Ko Yin Mr Eddie LAU Yum Chuen Mr Norman HO Hau Chong Non-executive Directors: Dr Patrick FUNG Yuk Bun Mr Dominic CHENG Ka On Mr Alexander AU Siu Kee Independent Non-executive Directors: Dr David SIN Wai Kin Mr WU King Cheong Dr Timpson CHUNG Shui Ming Mr Howard YEUNG Ping Leung Mr Thomas LIANG Cheung Biu The biographical details of the directors and relationship among them are shown under the section Biographical Details of Directors and Senior Management in this Annual Report. Save as disclosed therein, there is no financial, business, family or other material/relevant relationship among the directors. All the non-executive directors (including independent non-executive directors) of the Company have been appointed for a term of not more than three years. The terms of Dr David Sin Wai Kin, Mr Thomas Liang Cheung Biu, Dr Timpson Chung Shui Ming and Mr Howard Yeung Ping Leung up to 31 December 2014; Dr Patrick Fung Yuk Bun up to 31 December 2015; Mr Dominic Cheng Ka On, Mr Wu King Cheong and Mr Alexander Au Siu Kee are up to 31 December 2016; and all are subject to retirement by rotation and reelection in accordance with the Articles of Association of the Company.

44 41 Annual Report 2013 Miramar Hotel and Investment Company, Limited During the year, the Board adopted a board diversity policy which aims to set out the approach to achieve diversity on the Board. The Company recognises and embraces the benefits of having a diverse Board to enhance the quality of its performance. All Board appointments will be based on meritocracy, and candidates will be considered against the selection criteria. Selection of candidates will be based on a range of diversity perspectives, which would include but not limited to gender, age, cultural and educational background, professional experience, skills, knowledge and length of service. Appointments will be first considered by the Nomination Committee and recommendation of the Nomination Committee are then put to the Board for decision. The ultimate decision will be based on merit and contribution. The Board has received from each of the independent non-executive directors an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules. The Board considers that all the independent nonexecutive directors are independent. Notwithstanding (i) Mr Howard Yeung Ping Leung and Mr Thomas Liang Cheung Biu have been non-executive directors of the Company prior to their re-designation as independent non-executive directors on 6 December 2012; (ii) Mr Howard Yeung Ping Leung is a brother-in-law of Mr Tony Ng, who was also a non-executive director of the Company until his retirement from that position with effect from 7 June 2012; (iii) Mr Howard Yeung Ping Leung is indirectly interested in a subsidiary of the Company; and (iv) Mr Howard Yeung Ping Leung has minority interests in the business of the Company, the Board is of the view that they are independent since they did not take part in the day-to-day management or perform any management role or executive function in the Company or any of its subsidiaries before the re-designation. The Board is also of the view that Mr Howard Yeung Ping Leung is independent because (a) the family relationship between Mr Yeung and Mr Tony Ng is not justified as if it were in the closer relationship caught by Rule 3.13(6) of the Listing Rules; (b) Mr Yeung is only indirectly interested in an insignificant minority stake in a subsidiary of the Company and (c) Mr Yeung does not have material interest in any principal business activity of the Company or being involved in any material business dealings with the Company that would fall within the ambit of Rule 3.13(4) of the Listing Rules. In accordance with Articles 77, 78 and 79 of the Company s Articles of Association, Mr Alexander Au Siu Kee, Dr Patrick Fung Yuk Bun, Mr Lee Ka Shing, Mr Richard Tang Yat Sun and Mr Wu King Cheong shall retire by rotation at the forthcoming 2014 Annual General Meeting and, being eligible, have offered themselves for reelection. The Nomination Committee has also recommended to the Board that they are eligible for re-election. Mr Wu King Cheong has served as independent non-executive director for more than nine years. As an independent non-executive director with extensive experience and knowledge, Mr Wu has been providing objective and independent views to the Company over the years, and he remains committed to his independent role. The Board concurs with the view of the Nomination Committee that the long service of Mr Wu would not affect his exercise of independent judgement and is satisfied that Mr Wu has the required character, integrity and experience to continue fulfilling the role of an independent non-executive director, and the Board thus recommends Mr Wu for re-election at the 2014 Annual General Meeting. The roles undertaken by Dr Lee Shau Kee as Chairman of the Company and Mr Lee Ka Shing as Chief Executive Officer are segregated.

45 42 Corporate Governance Report The Board makes broad policy decisions and has delegated the responsibility to the Chief Executive Officer for corporate policy formulation and schematization, as well as promoting the Group s business development and enhancing its competitiveness and status in the industry. The key function of the Chairman is the management of the Board. The day-to-day management and operation of the Company s businesses are delegated to the senior management. The Board has the following matters specifically reserved for its approval: 1. Major acquisitions and disposals, and joint ventures; 2. Major project investments, and major capital expenditure programmes; 3. Annual budgets, and business and financial plans; 4. Financial statements, dividend distributions, capital structure, treasury policy, and accounting policy; 5. Remuneration policy and terms of employment of the senior executive team; and 6. Public announcements as required under the Listing Rules. During the year ended 31 December 2013, four board meetings were held to review and approve financial results, evaluate operating performance and direct business development. The Board has a total of four board committees to assist it in carrying out its responsibilities; and they are the General Purpose Committee, the Remuneration Committee, the Audit Committee and the Nomination Committee, all of which have defined terms of reference setting out their respective duties, powers and functions. Corporate Governance Function The Board has undertaken the following corporate governance functions: (a) to develop and review the Company s policies and practices on corporate governance and make recommendations to the Board; (b) to review and monitor the training and continuous professional development of directors and senior management; (c) to review and monitor the Company s policies and practices on compliance with legal and regulatory requirements; (d) to develop, review and monitor the code of conduct and compliance manual applicable to employees and directors; and (e) to review the Company s compliance with the code and disclosure in the Corporate Governance Report. General Purpose Committee The General Purpose Committee comprises five members, all of them are executive directors, namely Mr Lee Ka Shing, Mr Richard Tang Yat Sun, Mr Colin Lam Ko Yin, Mr Eddie Lau Yum Chuen and Mr Norman Ho Hau Chong. The General Purpose Committee operates with delegated authority from the Board.

46 43 Annual Report 2013 Miramar Hotel and Investment Company, Limited Remuneration Committee The Remuneration Committee comprises five members, three of them are independent non-executive directors, namely Dr David Sin Wai Kin, Mr Wu King Cheong and Dr Timpson Chung Shui Ming, and two are executive directors, namely Dr Lee Shau Kee and Mr Richard Tang Yat Sun. Dr Timpson Chung Shui Ming is the Chairman of the Remuneration Committee. The Remuneration Committee meets at least once a year to review the structure of remunerations for directors and senior management with reference to the skill, knowledge, experience, responsibilities, individual performance and the overall profitability of the Company. The Remuneration Committee regards that the remunerations offered to the directors and senior management are appropriate for their duties and in line with market practice. No director would be involved in deciding his own remunerations. The Board has delegated responsibility to the Remuneration Committee to determine the remuneration packages of individual executive directors and senior management, including benefits in kind, pension rights, compensation payments and compensation payable for loss or termination of their office or appointment. Audit Committee The Audit Committee is primarily responsible for review of the financial results of the Group and oversight of the Group s financial controls, internal controls and risk management systems. It comprises five members, three of them are independent non-executive directors, namely Dr David Sin Wai Kin, Mr Wu King Cheong and Dr Timpson Chung Shui Ming, and two are non-executive directors, namely Dr Patrick Fung Yuk Bun and Mr Dominic Cheng Ka On. Dr Timpson Chung Shui Ming is the Chairman of the Audit Committee. The Audit Committee met six times during the year ended 31 December The major work performed by the Audit Committee included reviewing the Group s internal controls, internal audit reports, audit plans, annual reports, interim reports, financial statements, connected transactions, approving the remunerations and terms of engagement of the external auditors and making recommendation to the Board on the re-appointment of auditors. Nomination Committee The Nomination Committee comprises five members, three of them are independent non-executive directors, namely Dr David Sin Wai Kin, Mr Wu King Cheong and Dr Timpson Chung Shui Ming, and two are executive directors, namely Dr Lee Shau Kee and Mr Lee Ka Shing. Dr Lee Shau Kee is the Chairman of the Nomination Committee. The Nomination Committee from time to time reviews the composition of the Board with particular regard to ensuring that there is an appropriate number of directors on the Board. It will evaluate the balance of skills, qualification, knowledge and experience of the candidate to the directorship as may be required by the Company from time to time. The Nomination Committee met twice during the year ended 31 December It has discussed and reviewed the composition of the Board; assessed the independence of all independent non-executive directors; recommended to the Board for approval the board diversity policy and the re-election of all the retiring Directors at the Annual General Meeting.

47 44 Corporate Governance Report Attendance Record of the Meetings The number of meetings held by the Board, the Committees and the Company during the year ended 31 December 2013 and the attendance of directors are set out in the table below: Directors Board Audit Committee Meetings attended/held Remuneration Committee Nomination Committee 2013 Annual General Meeting Executive Directors Dr LEE Shau Kee 4/4 N/A 1/1 2/2 1/1 Mr LEE Ka Shing 4/4 N/A N/A 2/2 1/1 Mr Richard TANG Yat Sun 4/4 N/A 1/1 N/A 1/1 Mr Colin LAM Ko Yin 4/4 N/A N/A N/A 1/1 Mr Eddie LAU Yum Chuen 4/4 N/A N/A N/A 1/1 Mr Norman HO Hau Chong 4/4 N/A N/A N/A 1/1 Non-executive Directors: Dr Patrick FUNG Yuk Bun 3/4 6/6 N/A N/A 0/1 Mr Dominic CHENG Ka On 4/4 6/6 N/A N/A 1/1 Mr Alexander AU Siu Kee 4/4 N/A N/A N/A 1/1 Independent Non-executive Directors: Dr David SIN Wai Kin 4/4 6/6 1/1 2/2 1/1 Mr WU King Cheong 4/4 6/6 1/1 2/2 1/1 Dr Timpson CHUNG Shui Ming 4/4 6/6 1/1 2/2 1/1 Mr Howard YEUNG Ping Leung 4/4 N/A N/A N/A 1/1 Mr Thomas LIANG Cheung Biu 4/4 N/A N/A N/A 1/1

48 45 Annual Report 2013 Miramar Hotel and Investment Company, Limited Directors Training During the year ended 31 December 2013, the directors have participated in continuous professional development to develop and refresh their knowledge and skills in the following manner: Directors Executive Directors: Dr LEE Shau Kee Mr LEE Ka Shing Mr Richard TANG Yat Sun Mr Colin LAM Ko Yin Mr Eddie LAU Yum Chuen Mr Norman HO Hau Chong Type of trainings A, B A, B A, B A, B A, B A, B Non-executive Directors: Dr Patrick FUNG Yuk Bun Mr Dominic CHENG Ka On Mr Alexander AU Siu Kee A, B A, B A, B Independent Non-executive Directors: Dr David SIN Wai Kin Mr WU King Cheong Dr Timpson CHUNG Shui Ming Mr Howard YEUNG Ping Leung Mr Thomas LIANG Cheung Biu B A, B A, B A, B A, B A: attending seminars and/or conferences and/or forums B: reading materials relevant to the directors duties and responsibilities

49 46 Corporate Governance Report Auditors Remuneration During the year ended 31 December 2013, the fees (before out-of-pocket expenses) paid/payable to the Company s auditors, KPMG, for the provision of audit services and non-audit services are as follows: Remuneration HK$ 000 Audit services 3,616 Non-audit services: Interim review 380 Other services 380 4,376 Accountability and Audit The Directors are responsible for overseeing the preparation of the annual financial statements which give a true and fair view of the Group s state of affairs and of the results and cash flow for the year. The Group s financial statements are prepared in accordance with all relevant statutory requirements and applicable accounting standards. The Directors are responsible for ensuring that appropriate accounting policies are selected and applied consistently; and that judgment and estimates made are fair and reasonable; and that the accounts are prepared on a going concern basis. A statement by the auditors about their reporting responsibilities is included in the Independent Auditor s Report on pages 79 to 80 of this Annual Report. Internal Control The Board has overall responsibility for the system of internal controls of the Company and has reviewed its effectiveness. The Board is committed to implementing an effective and sound internal controls system to safeguard the interests of shareholders and the Company s assets. During the year under review, internal audit was undertaken to provide the management with assurance that its business operations and management practices complied with international and professional standards. With reference to the COSO (The Committee of Sponsoring Organisations of the Treadway Commission) internal control framework, the Company has conducted an assessment of the internal controls system against the five elements of COSO, namely control environment, risk assessment, control activities, information & communication and monitoring. The Internal Audit Department of the Company, which reports directly to the Audit Committee and is independent of the Company s daily operations, is responsible for conducting risk-based audits on the major operating activities of the Group. Its objective is to ensure that all material controls, including financial, operational and compliance controls and risk management functions are in place and functioning effectively. The Audit Committee has reviewed the financial results of the Group for the year ended 31 December 2013 and discussed with the internal auditor and independent auditors matters on auditing, internal control and financial report of the Group.

50 47 Annual Report 2013 Miramar Hotel and Investment Company, Limited Model Code for Securities Transaction by Directors The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) as set out in Appendix 10 of the Listing Rules as the code for dealing in securities of the Company by the directors. Having made specific enquiries, the Company confirmed that all directors had complied with the required standards set out in the Model Code throughout the year ended 31 December Communication with Shareholders During the year ended 31 December 2013, the Board has adopted a Shareholders Communication Policy reflecting mostly the current practices of the Company for communication with its shareholders. Such policy is to promote effective communication with shareholders of the Company and enable them to exercise their rights as shareholders in an informed manner and to furnish the investment community with equal and timely access to information about the Company. It will be updated in response to any subsequent changes in internal structure, regulatory and market developments. The Company has established a number of channels for maintaining an on-going dialogue with its shareholders as follows: (i) (ii) corporate communications such as annual reports, interim reports and circulars are issued in printed form and are available on the Stock Exchange s website at and the Company s website at periodic announcements are made through the Stock Exchange and published on the respective websites of the Stock Exchange and the Company; (iii) corporate information is made available on the Company s website and the Articles of Association of the Company is made available on the respective websites of the Stock Exchange and the Company; (iv) Annual General Meeting (AGM) and Extraordinary General Meeting (EGM) provide a forum for the shareholders to make comments and exchange views with the Directors and senior management; and (v) the Company s Share Registrar serves the shareholders in respect of share registration, dividend payment, change of shareholders particulars and related matters.

51 48 Corporate Governance Report Shareholders Rights (a) Procedures for shareholders to convene an extraordinary general meeting ( EGM ) Pursuant to Section 566 of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (the Companies Ordinance ), shareholder(s) representing at least 5% of the total voting rights of all the shareholders having a right to vote at general meetings of the Company can make a request to call an EGM. The request: (i) must state the general nature of the business to be dealt with at the EGM; (ii) may include the text of a resolution that may properly be moved and is intended to be moved at the EGM; (iii) may consist of several documents in like form; (iv) may be sent in hard copy form (to the Company s registered office, which is situated at 15/F Miramar Tower, 132 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong for the attention of the Company Secretary) or in electronic form (via at IR@miramar-group.com); and (v) must be authenticated by the person or persons making it. Pursuant to Section 567 of the Companies Ordinance. Directors must call an EGM within 21 days after the date on which they become subject to the requirement and the EGM so called must be held on a date not more than 28 days after the date of the notice convening the EGM. Pursuant to Section 568 of the Companies Ordinance, if the Directors do not do so, the shareholders who requested the EGM, or any of them representing more than one half of the total voting rights of all of them, may themselves convene an EGM. The EGM must be called for a date not more than 3 months after the date on which the Directors become subject to the requirement to call an EGM. The Company must reimburse any reasonable expenses incurred by the shareholders requesting the EGM by reason of the failure of the Directors duly to call the EGM. (b) Procedures for putting forward enquires to the Board Shareholders may at any time send their enquiries and concerns to the Board in writing through the Company Secretary whose contact details are as follows: 15/F, Miramar Tower 132 Nathan Road Kowloon, Hong Kong Fax: (852) IR@miramar-group.com Shareholders may also make enquiries with the Board at the general meetings of the Company.

52 49 Annual Report 2013 Miramar Hotel and Investment Company, Limited (c) Procedures for shareholders to request circulation of resolution for annual general meeting ( AGM ) Pursuant to Section 615 of the Companies Ordinance, shareholder(s) can make a request to circulate a notice of a resolution that may properly be moved and is intended to be moved at an AGM. The request must be made by: (i) (ii) shareholder(s) representing at least 2.5% of the total voting rights of all shareholders who have a right to vote on the resolution at the AGM to which the request relates; or at least 50 shareholders who have a right to vote on the resolution at the AGM to which the request relates. The request: (i) (ii) may be sent in hard copy form (to the Company s registered office, which is situated at 15/F, Miramar Tower, 132 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong for the attention of the Company Secretary) or in electronic form (via at IR@miramar-group.com); must identify the resolution of which notice is to be given; (iii) must be authenticated by the person or persons making it; and (iv) must be received by the Company not later than 6 weeks before the AGM to which the request relates or if later, the time at which notice is given of that AGM. Constitutional Documents During the year ended 31 December 2013, there are no changes in the Company s constitutional documents.

53 50 Report of the Directors The directors have pleasure in submitting their annual report together with the audited financial statements for the year ended 31 December Principal Activities The principal activity of the Company is investment holding, and the principal activities of its principal subsidiaries are property investment, property development and sales, hotel ownership and management, food and beverage operation, travel operation and apparel operation; the particulars of which are set out in note 12 to the financial statements. The analysis of the principal activities and geographical locations of the operations of the Company and its subsidiaries during the year ended 31 December 2013 are set out in note 10 to the financial statements. Major Customers and Suppliers Due to the diversity and nature of the Group s activities, the aggregate percentage of the Group s sales and purchases attributable to the Group s five largest customers and suppliers respectively was less than 30%. At 31 December 2013, none of the directors, their associates or shareholders who, to the knowledge of the directors, own more than 5% of the Company s share capital, had an interest in any of the five largest customers and suppliers. Financial Statements The profit of the Group for the year ended 31 December 2013 and the state of the Company s and the Group s affairs as at that date are set out in the financial statements on pages 81 to 163. An interim dividend of 17 Hong Kong cents per share (2012: 16 Hong Kong cents per share) was paid on 18 October The directors now recommend the payment of a final dividend of 27 Hong Kong cents per share (2012: 25 Hong Kong cents per share) in respect of the year ended 31 December 2013, totalling HK$253,981,000. Charitable Donations Donations made by the Group during the year ended 31 December 2013 amounted to HK$78,369 (2012: HK$44,046). Fixed Assets Details of movements in fixed assets are set out in note 11 to the financial statements.

54 51 Annual Report 2013 Miramar Hotel and Investment Company, Limited Directors The directors who held office during the year ended 31 December 2013 and up to the date of this report were: Executive Directors: Dr LEE Shau Kee Mr LEE Ka Shing Mr Richard TANG Yat Sun Mr Colin LAM Ko Yin Mr Eddie LAU Yum Chuen Mr Norman HO Hau Chong Non-executive Directors: Dr Patrick FUNG Yuk Bun Mr Dominic CHENG Ka On Mr Alexander AU Siu Kee Independent Non-executive Directors: Dr David SIN Wai Kin Mr WU King Cheong Dr Timpson CHUNG Shui Ming Mr Howard YEUNG Ping Leung Mr Thomas LIANG Cheung Biu In accordance with Articles 77, 78 and 79 of the Company s Articles of Association, Mr Alexander Au Siu Kee, Dr Patrick Fung Yuk Bun, Mr Lee Ka Shing, Mr Richard Tang Yat Sun and Mr Wu King Cheong shall retire by rotation at the forthcoming 2014 Annual General Meeting and, being eligible, have offered themselves for reelection. The Nomination Committee has also recommended to the Board that they are eligible for re-election. Directors Service Contracts No director proposed for re-election at the forthcoming 2014 Annual General Meeting has an unexpired service contract which is not determinable by the Company within one year without payment of compensation, other than normal statutory obligations.

55 52 Report of the Directors Disclosure of Interests Directors interests in shares At 31 December 2013, the interests and short positions of the directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance ( SFO )) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows: Name of Company Name of Director Personal Interests Family Interests Corporate Interests Other Interests Percentage of total issued shares Miramar Hotel and Investment Company, Limited Dr LEE Shau Kee 260,239,250 (note 1) Mr LEE Ka Shing 260,239,250 (note 2) 45.08% 45.08% Dr David SIN Wai Kin 4,158, % Dr Patrick FUNG Yuk Bun 8,426, % (note 3) Mr Dominic CHENG Ka On 7,774,640 4, % Mr Richard TANG Yat Sun 125,000 11,241, % (note 4) Mr Thomas LIANG Cheung Biu 1,080,000 (note 5) 0.19% Centralplot Inc. Mr Richard TANG Yat Sun 2,221 2% Strong Guide Property Limited Dr LEE Shau Kee 2 100% (note 6) Mr LEE Ka Shing 2 (note 6) 100% Save as disclosed above, as at 31 December 2013, none of the directors or the chief executive of the Company had held any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations as defined in the SFO. Apart from the foregoing, at no time during the year ended 31 December 2013 was the Company or any subsidiary a party to any arrangements to enable the directors of the Company to acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate.

56 53 Annual Report 2013 Miramar Hotel and Investment Company, Limited Substantial shareholders and others As at 31 December 2013, the interests of every shareholder in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO were as follows: Substantial shareholders Ordinary shares held Percentage of total issued shares Dr Lee Shau Kee 260,239,250 (note 1) 45.08% Mr Lee Ka Shing 260,239,250 (note 2) 45.08% Rimmer (Cayman) Limited ( Rimmer ) 260,239,250 (note 7) 45.08% Riddick (Cayman) Limited ( Riddick ) 260,239,250 (note 7) 45.08% Hopkins (Cayman) Limited ( Hopkins ) 260,239,250 (note 7) 45.08% Henderson Development Limited ( Henderson Development ) 260,239,250 (note 8) 45.08% Henderson Land Development Company Limited ( Henderson Land ) 260,239,250 (note 8) 45.08% Aynbury Investments Limited ( Aynbury ) 260,239,250 (note 8) 45.08% Higgins Holdings Limited ( Higgins ) 100,612,750 (note 8) 17.43% Multiglade Holdings Limited ( Multiglade ) 79,121,500 (note 8) 13.71% Threadwell Limited ( Threadwell ) 80,505,000 (note 8) 13.95% Persons other than substantial shareholders Mr Chong Wing Cheong 57,594, % Save as disclosed above, as at 31 December 2013, none of the above shareholders had held any interests or short position in the shares, underlying shares or debentures of the Company or any of its associated corporation as defined in the SFO. Notes: (1) Dr Lee Shau Kee beneficially owned all the issued shares in Rimmer, Riddick and Hopkins. By virtue of the SFO, Dr Lee Shau Kee is taken to be interested in 260,239,250 shares, which are duplicated in the interests described in Notes 2, 7 and 8. (2) As a director of the Company and one of the discretionary beneficiaries of two discretionary trusts holding units in a unit trust ( Unit Trust) as described in Note 7, Mr Lee Ka Shing is taken to be interested in 260,239,250 shares, which are duplicated in the interests described in Notes 1, 7 and 8, by virtue of the SFO. (3) All these shares were held by a unit trust of which Dr Patrick Fung Yuk Bun was a beneficiary. (4) These shares were held through corporations in which Mr Richard Tang Yat Sun owned more than 30% of the issued shares. (5) All these shares were held by a trust of which Mr Thomas Liang Cheung Biu s spouse was a beneficiary. (6) These 2 shares in Strong Guide Property Limited were equally owned by the respective wholly-owned subsidiaries of the Company and Henderson Land. By virtue of the SFO, Dr Lee Shau Kee and Mr Lee Ka Shing are taken to be interested in Henderson Land and the Company as set out in Notes 1, 2, 7 and 8. (7) Rimmer and Riddick, trustees of different discretionary trusts, held units in the Unit Trust. Hopkins was the trustee of the Unit Trust which beneficially owned all the issued ordinary shares in Henderson Development. These 260,239,250 shares are duplicated in the interests described in Notes 1, 2 and 8. (8) Henderson Development had a controlling interest in Henderson Land which was the holding company of Aynbury. The 260,239,250 shares were beneficially owned by some of the subsidiaries of Aynbury. Higgins, Multiglade and Threadwell were subsidiaries of Aynbury. These 260,239,250 shares represent the shares described in Notes 1, 2 and 7.

57 54 Report of the Directors Directors and Management Emoluments Particulars of directors emoluments and the five highest paid individuals in the Group are set out in notes 5 and 6(a) respectively to the financial statements. Continuing Connected Transactions and Connected Transactions The Group has the following continuing connected transactions and connected transaction during the year ended 31 December 2013: (1) On 8 February 2005, a confirmation of sub-lease (the Sub-Lease ) was entered into between Profit Advantage Limited, a wholly-owned subsidiary of the Company as tenant (the Tenant ) and IFC Development Limited as landlord (the Landlord ), whereby the Landlord agreed to sub-lease to the Tenant the premises at Shop Nos on Level Three of ifc Mall (Retail Accommodation on Site R of Inland Lot No. 8898) (the ifc Premises ). Initial term of three years which commenced from 7 July 2004 with a first option (the 1st Option ) exercisable by the Tenant at the expiry of the initial sub-lease period on 6 July 2007 to renew the sublease of the ifc Premises for three years, and a second option (the 2nd Option ) exercisable by the Tenant at the expiry of the First Renewed Period to renew the sub-lease of the ifc Premises for a further three years if the 1st Option is exercised by the Tenant. Upon the expiry of the initial term of the Sub-Lease on 6 July 2007, the Tenant exercised the 1st Option to renew the sub-lease of the ifc Premises (the First Renewed Sub-Lease ) and certain storerooms and advertisement lightbox(es) at the ifc Mall were also licenced by the Landlord to the Tenant for three years commencing from 7 July 2007 to 6 July 2010 ( First Renewed Period ). Upon the expiry of the First Renewed Period on 6 July 2010, the Tenant exercised the 2nd Option to renew the sub-lease of the ifc Premises (the Second Renewed Sub-Lease ) and certain storerooms and advertisement lightbox(es) at the ifc Mall were also licenced by the Landlord to the Tenant (the Licences ) upon the terms as detailed below: Term : Three years commencing from 7 July 2010 to 6 July 2013, and for the Licences, on an annual basis, subject to termination upon termination of the Second Renewed Sub-Lease. Rent and other charges : The Second Renewed Sub-Lease is at a basic rent of HK$697, plus the Turnover Rent (exclusive of rates, air-conditioning and management charges, promotional levy and all other outgoings (if any)); and the Licences are at an aggregate licence fee of HK$31, (inclusive of management charges but exclusive of air-conditioning charges, rates, electricity, tax and other outgoings (if any)) per month; which shall both be payable on a monthly basis; and

58 55 Annual Report 2013 Miramar Hotel and Investment Company, Limited The aggregate air-conditioning and management charges and promotional levy payable on monthly basis in respect of the Second Renewed Sub- Lease shall be approximately HK$328, per month (subject to review from time to time) and the extra air-conditioning charges at a rate of HK$1, per day (subject to review from time to time). The aggregate air-conditioning charges payable on a monthly basis in respect of the Licences shall be approximately HK$21, per month (subject to review from time to time). As the Landlord is an associate of Henderson Land Development Company Limited ( Henderson Land ), a substantial shareholder of the Company, it is a connected person of the Company under Rule 14A.11 of Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the Listing Rules ) and the entering into of the Second Renewed Sub-Lease constituted a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. The Group has commenced operating two up-market restaurants at the ifc Mall since their soft openings on 6 February 2005 and the Directors (including independent non-executive Directors) are of the opinion that the ifc Mall, being a landmark in Hong Kong and located in the city center, is an ideal location for the Company to continue to operate the two up-market restaurants and to bring profits to the Group. The storerooms and the advertisement lightbox(es) under the Licences are used in connection with the restaurant business and the Directors are of the opinion that the use of the storerooms and the advertisement lightbox(es) are desirable for the operation of the restaurant business in ifc Mall. (2) On 2 February 2010, a lease (the and 1812 Lease ) was entered into between Shahdan Limited, a wholly-owned subsidiary of the Company as landlord and Union Medical as tenant, whereby Shahdan agreed to let to Union Medical the premises upon the terms as detailed below: Premises : Units 1803, , 1807 and 1812, 18th Floor, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Miramar Tower and 1812 Premises ). Term : Three years commencing from 1 February 2010 to 31 January Rent and other charges : The total rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$361,000.00; The aggregate monthly management fee and air-conditioning charges (subject to the periodic review or revision by Shahdan or its designated property manager) is HK$64,247.90; and Extra chilled water supply costs may be charged by Shahdan to Union Medical for additional chilled water supply required by Union Medical which is beyond the specified normal daily chilled water supply hours.

59 56 Report of the Directors Rent-free period : Three months commencing from 1 February 2010 during which Union Medical shall not be obliged to pay rent but shall pay the management fee, air-conditioning charges, government rates and utility charges for the Miramar Tower and 1812 Premises. User : To be used as a clinic only. As Union Medical is a connected person of the Company, the entering into of the and 1812 Lease constituted a continuing connected transaction for the Company under Chapter 14A of the Listing Rule. (3) On 22 June 2010, the Group entered into the following agreements with Union Medical which constituted continuing connected transactions for the Company: (i) A lease (the Lease ) entered into between Shahdan as landlord and Union Medical as tenant; and (ii) A lease (the 1808 and 1813 Lease ) entered into between Shahdan as landlord and Union Medical as tenant. Details of the terms and conditions of the leases are set out as follows: Details of the Lease Premises : Units , 18th Floor, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Miramar Tower Premises ). Term : Three years commencing from 1 June 2010 to 31 May Rent and other charges : The rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$130,000.00; and The aggregate monthly management fee and air-conditioning charges (subject to the periodic review or revision by Shahdan or its designated property manager) is HK$24, User : To be used as a clinic only. Sublet : The tenant shall have the right to sublet a part of the Miramar Tower Premises during the term to Paragon Clinic Limited, which is a third party (not being a connected person of the Company).

60 57 Annual Report 2013 Miramar Hotel and Investment Company, Limited Details of the 1808 and 1813 Lease Premises : Units 1808 and 1813, 18th Floor, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Miramar Tower 1808 and 1813 Premises ). Term : Three years commencing from 15 June 2010 to 14 June Rent and other charges : The total rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$133,000.00; The aggregate monthly management fee and air-conditioning charges (subject to the periodic review or revision by Shahdan or its designated property manager) is HK$23,392.70; and Extra chilled water supply costs may be charged by Shahdan to Union Medical for additional chilled water supply required by Union Medical which is beyond the specified normal daily chilled water supply hours. Rent-free period : Two months commencing from 15 June 2010 during which Union Medical shall not be obliged to pay rent but shall pay the management fee, airconditioning charges, government rates and utility charges for the Miramar Tower 1808 and 1813 Premises. User : To be used as a clinic only. As Union Medical is a connected person of the Company, the entering into of the Lease and the 1808 and 1813 Lease constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rule. (4) On 26 August 2010, a confirmation of lease (the Confirmation of Lease ) was entered into between Profit Advantage Limited, a wholly owned subsidiary of the Company as tenant (the Tenant ) and (Beijing Gaoyi Property Development Co., Ltd.*) as Landlord (the Landlord ), whereby the Landlord agreed to lease to the Tenant the premises upon the terms as detailed below: Premises : Unit Nos. 201, 202, 203, 204 and 205 on Level two of West Tower, World Financial Centre, No. 1 East 3rd Ring Middle Road, Chaoyang District, Beijing, the People s Republic of China ( PRC ), of approximately 2, square meter (the wfc Premises ). * For identification only

61 58 Report of the Directors Term : Initial term of three years commencing from 15 November 2010 with a first option (the 1st Option ) exercisable by the Tenant at the expiry of the initial lease period on 14 November 2013 to renew the lease at the wfc Premises for three years, and a second option exercisable by the Tenant to renew the lease of the wfc Premises for a further two years if the 1st Option is exercised by the Tenant. Rent and other charges : The rent payable on monthly basis (exclusive of management fee and other related charges) during the term is the basic rent with reference to the net area of the wfc Premises at the rate of RMB130 (approximately HK$149.40) per square meter together with turnover rent representing the amount by which 7% of the gross turnover before tax per month derived from the business conducted at the wfc Premises (excluding 10% service charge, discounts and/or other rebates) exceeds the basic rent per month (the Turnover Rent ); Notwithstanding the above, it is however provided that for the period from the date of commencement of the initial term and prior to the date before the leasing rate of the office space at the World Financial Centre having reached 50%, the basic rent payable per month for the wfc Premises shall only be at a basic rent calculated at the rate of RMB65 (approximately HK$74.70) per square meter per month and no Turnover Rent shall be required to be paid during such period. Upon the leasing rate having reached 50%, the rent payable per month shall revert to the basis as mentioned in the foregoing paragraph; and Management fee (exclusive of promotional levy) payable on monthly basis during the term is at the rate of RMB50 (approximately HK$57.47) per square meter with reference to the net area of the wfc Premises (subject to review from time to time by the Landlord or the property management company appointed by the Landlord). Renovation period and rent-free period : Renovation period of four months starting from 15 November 2010 to 14 March 2011, and rent free period of a further three months starting from 15 March 2011 to 14 June 2011, during which the Tenant is not obliged to pay rent but has to pay for the management fee and all other related charges. User : The wfc Premises shall be used for operating an up-market restaurant. As the Landlord is an indirect wholly owned subsidiary of Henderson Land, a substantial shareholder of the Company, it is an associate of Henderson Land and thus a connected person of the Company under the Listing Rules. The entering into of the Confirmation of Lease therefore constitute continuing connected transaction for the Company under Chapter 14A of the Listing Rules.

62 59 Annual Report 2013 Miramar Hotel and Investment Company, Limited (5) On 17 September 2010, the Group entered into the following agreements with Union Medical which constituted continuing connected transactions for the Company: (i) A lease (the 1814 Lease ) entered into between Shahdan as landlord and Union Medical as tenant; and (ii) A lease (the 1815 Lease ) entered into between Shahdan as landlord and Union Medical as tenant. Details of the terms and conditions of the leases are set out as follows: Details of the 1814 Lease Premises : Unit 1814, 18th Floor, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Miramar Tower 1814 Premises ). Term : Three years commencing from 16 August 2010 to 15 August Rent and other charges : The rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$31,000.00; The aggregate monthly management fee and air-conditioning charges (subject to the periodic review or revision by Shahdan or its designated property manager) is HK$5,222.20; and Extra chilled water supply costs may be charged by Shahdan to Union Medical for additional chilled water supply required by Union Medical which is beyond the specified normal daily chilled water supply hours. Rent-free period : One month commencing from 16 August 2010 during which Union Medical shall not be obliged to pay rent but shall pay the management fee, airconditioning charges, government rates and utility charges for the Miramar Tower 1814 Premises. User : To be used as a clinic only. Details of the 1815 Lease Premises : Unit 1815, 18th Floor, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Miramar Tower 1815 Premises ). Term : Three years commencing from 16 September 2010 to 15 September 2013.

63 60 Report of the Directors Rent and other charges : The rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$21,500.00; The aggregate monthly management fee and air-conditioning charges (subject to the periodic review or revision by Shahdan or its designated property manager) is HK$3,579.10; and Extra chilled water supply costs may be charged by Shahdan to Union Medical for additional chilled water supply required by Union Medical which is beyond the specified normal daily chilled water supply hours. Rent-free period : One month commencing from 16 September 2010 during which Union Medical shall not be obliged to pay rent but shall pay the management fee, air-conditioning charges, government rates and utility charges for the Miramar Tower 1815 Premises. User : To be used as a clinic only. As Union Medical is a connected person of the Company, the entering into of the 1814 Lease and the 1815 Lease constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rule. (6) On 7 December 2010, the Group entered into the following agreements with Henderson Real Estate Agency Limited ( HREAL ) which constituted continuing connected transactions for the Company: (i) A tenancy agreement (the Tenancy Agreement ) entered into between Shahdan as landlord and HREAL as tenant; (ii) A licence agreement (the Podium Roof Licence Agreement ) entered into between Shahdan as licensor and HREAL as licensee; and (iii) A licence agreement (the Fan Room Licence Agreement ) entered into between Shahdan as licensor and HREAL as licensee. Details of the terms and conditions of the agreements are set out as follows: Details of the Tenancy Agreement Premises : Shop 3013, 3/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Shop 3013 Premises ). Term : Two years commencing from 16 June 2011 to 15 June 2013, both days inclusive, provided that the tenant shall have the right to early terminate this tenancy by serving six months prior written notice to the landlord.

64 61 Annual Report 2013 Miramar Hotel and Investment Company, Limited Rent and other charges : (a) rent payable on a monthly basis (exclusive of Government rates, management fee, air-conditioning charges and promotion contribution) during the term is HK$485,000.00; (b) aggregate monthly management fee and air-conditioning charges (subject to the periodic review by Shahdan or its designated building manager) is HK$77,841.00; (c) monthly promotion contribution, being 1% of the monthly rent of the Shop 3013 Premises (subject to periodic review by Shahdan) is HK$4,850.00; and (d) Government rates as per Government s assessment. User : To be used as a property agency only. Details of the Podium Roof Licence Agreement Podium Roof : Portion of Podium Roof, 3/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. Term : Two years commencing from 16 June 2011 to 15 June 2013, both days inclusive provided that the licensee shall have the right to early terminate this license by serving six months prior written notice to the licensor. Licence fee and other charges : (a) licence fee payable on a monthly basis (exclusive of Government rates and management fee) during the term is HK$162,000.00; (b) monthly management fee (subject to the periodic review by Shahdan or its designated building manager) is HK$8,901.20; and (c) Government rates as per Government s assessment. User : Restricted to legal usage only. Details of the Fan Room Licence Agreement Fan Room : Fan Room, 3/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. Term : Two years commencing from 16 June 2011 to 15 June 2013, both days inclusive provided that the licensee shall have the right to early terminate this license by serving six months prior written notice to the licensor.

65 62 Report of the Directors Licence fee and other charges : (a) Licence fee payable on a monthly basis (exclusive of Government rates) during the term is HK$32,000.00; and (b) Government rates as per Government s assessment. User : Restricted to legal usage only. As HREAL is a connected person of the Company, the entering into of the Tenancy Agreement, Podium Roof Licence Agreement and Fan Room Licence Agreement constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. (7) On 12 August 2011, the Group entered into the following agreements with HREAL which constituted continuing connected transactions for the Company: (i) A tenancy agreement (the Tenancy Agreement ) entered into between Shahdan as landlord and HREAL as tenant; (ii) A tenancy agreement (the First Tenancy Agreement ) entered into between Shahdan as landlord and HREAL as tenant; (iii) A tenancy agreement (the Second Tenancy Agreement ) entered into between Shahdan as landlord and HREAL as tenant which has been expired on 4 August 2012; and (iv) A licence agreement (the Signage A Licence Agreement ) entered into between Shahdan as licensor and HREAL as licensee. Details of the terms and conditions of the agreements are set out as follows: Details of the Tenancy Agreement Premises : Shop , 5/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Shop Premises ). Term : Two years eight months and four days commencing from 1 December 2011 to 4 August 2014, both days inclusive. Both the landlord and the tenant shall have the right to early terminate the lease by giving a notice of not less than three months to the other party after 4 February Rent-free period : Three months commencing from and inclusive of 1 December Rent and other charges : (a) rent payable on a monthly basis (exclusive of Government rates, management fee, air-conditioning charges and promotion contribution) during the term is HK$742,900.00; (b) Government rates (subject to Government s review) is HK$83, per quarter;

66 63 Annual Report 2013 Miramar Hotel and Investment Company, Limited (c) aggregate monthly management fee and air-conditioning charges (subject to periodic review by Shahdan or its designated management company of the Shop Premises) is HK$161,531.80; (d) monthly promotion contribution, being 1% of the monthly rent of the Shop Premises, that is HK$7, subject to periodic review by Shahdan; and (e) decoration plan vetting fee is HK$27, and debris disposal fee is HK$55, User : To be used as a property agency only. Details of the Renewal First Tenancy Agreement Premises : Shop 503A-C, 5/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Shop 503A-C Premises ). Term : Three years commencing on 5 August 2011 to 4 August 2014, both days inclusive. Both the landlord and the tenant shall have the right to early terminate the lease by giving a notice of not less than three months to the other party after 4 February Rent and other charges : (a) rent payable on a monthly basis (exclusive of Government rates, management fee, air-conditioning charges and promotion contribution) during the term is HK$458,000.00; (b) Government rates (subject to Government s review) is HK$71, per quarter; (c) aggregate monthly management fee and air-conditioning charges (subject to the review at such time to be determined by Shahdan or its designated management company of the Shop 503A-C Premises) is HK$82,622.80; and (d) monthly promotion contribution, being 1% of the monthly rent of the Shop 503A-C Premises, that is HK$4,580.00, subject to periodic review by Shahdan. User : To be used as a property agency only.

67 64 Report of the Directors Details of the Signage A Licence Agreement Signage A : Signage A on the external wall facing Nathan Road of Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. Term : Three years commencing from 1 September 2011 to 31 August 2014 subject to the right of early termination. Both the licensor and the licensee shall have the right to early terminate the license by giving a notice not less than three months after 29 February Licence fee and other charges : (a) the licence fee (inclusive of electricity charges) payable on a monthly basis during the term is HK$55,000.00; and (b) Government rates (subject to Government s review) is HK$7, per quarter. User : To be used for advertising the trade name of the licensee only. As HREAL is a connected person of the Company, the entering into of the Tenancy Agreement, First Tenancy Agreement, Second Tenancy Agreement and Signage A Licence Agreement constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. (8) On 29 December 2011, a lease (the 1816 Lease ) was entered into between Shahdan as landlord and Union Medical as tenant, whereby Shahdan agreed to let to Union Medical the premises upon the terms as detailed below: Premises : Unit 1816, 18th Floor, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Miramar Tower 1816 Premises ). Term : One year and nine months, commencing from 16 December 2011 to 15 September Rent and other charges : The rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$49,000.00; The aggregate monthly management fee and air-conditioning charges (subject to the periodic review or revision by Shahdan or its designated property manager) is HK$6,074.70; and Extra chilled water supply costs may be charged by Shahdan to Union Medical for additional chilled water supply required by Union Medical which is beyond the specified normal daily chilled water supply hours.

68 65 Annual Report 2013 Miramar Hotel and Investment Company, Limited Rent-free period : One month commencing from 16 December 2011 during which Union Medical shall not be obliged to pay rent but shall pay the management fee, air-conditioning charges, government rates and utility charges for the Miramar Tower 1816 Premises. User : To be used as a clinic only. As Union Medical is a connected person of the Company, the entering into of the 1816 Lease constituted continuing connected transaction for the Company under Chapter 14A of the Listing Rule. (9) On 15 May 2012, a lease (the Citistore Lease ) was entered into between Shahdan as landlord and Citistore Limited ( Citistore ) as tenant, whereby Citistore had agreed to lease from Shahdan the premises upon the terms as detailed below: Citistore Premises : Shop 2004, 2nd Floor, Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. Term : Initial term of 3 years commencing from 3 October 2011 to 2 October 2014 ( Initial term ). Rent and other charges : (a) The rent payable on monthly basis (exclusive of Government rates, management fee, air-conditioning charges and promotion contribution) (payable in advance on the 1st day of each month) during the term shall be as follows: (i) From 3 October 2011 to 2 October 2014, basic rent in the sum of HK$220, per month plus the Annual Additional Turnover Rent (payable in arrear); (ii) From 3 October 2014 to 2 October 2017, provided the option (as defined below) is exercised by the Tenant, at open market rent plus the Annual Additional Turnover Rent (payable in arrear); (b) Government rates (subject to Government s review) is HK$19, per quarter (payable on the 1st day of January, April, July and October); (c) aggregate monthly management fee and air-conditioning charges for the period from 3 October 2011 to 31 December 2011 is HK$36, and commencing from 1 January 2012 will be HK$41, (subject to periodic review by Shahdan or its property manager) (payable in advance on the 1st day of each month); and

69 66 Report of the Directors (d) monthly promotion contribution being 1% of the monthly basic rent as referred to in (a) above (subject to periodic review by Shahdan) (payable in advance on the 1st day of each month). Option : Citistore is entitled to a option, exercisable by Citistore by giving Shahdan not less than 6 months and not more than 7 months written notice prior to the expiry of the Initial term to renew the New Citistore Lease for 3 years. User : To be used as retail shop only. As Citistore is a wholly-owned subsidiary of Henderson Land, which in turn a substantial shareholder of the Company. Accordingly, Citistore is a connected person of the Company and the entering into of the Citistore Lease constituted a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. (10) On 17 August 2012, a lease (the Lease ) was entered into between Shahdan as landlord and Union Medical as tenant, whereby Shahdan agreed to let to Union Medical the premises upon the terms as detailed below: Premises : Units , 18th Floor Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Miramar Tower Premises ). Term : One year three months and four days, commencing from 12 June 2012 to 15 September Rent and other charges : The rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$92,000.00; and The aggregate monthly management fee and air-conditioning charges (subject to the periodic review by Shahdan or its designated management company of Miramar Tower) is HK$12, User : To be used as a clinic only. As Union Medical is a connected person of the Company, the entering into of the Lease constituted continuing connected transaction for the Company under Chapter 14A of the Listing Rules.

70 67 Annual Report 2013 Miramar Hotel and Investment Company, Limited (11) On 18 March 2013, a New Lease was entered into between Shahdan as landlord and Union Medical as tenant, whereby Shahdan agreed to let to Union Medical the premises upon the terms as detailed below: Premises : Whole of 18th Floor, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. Term : Miramar Tower and 1812 Premises: Three years, commencing from 1 February 2013 to 31 January 2016 (both days inclusive); Miramar Tower Premises: Two years eight months, commencing from 1 June 2013 to 31 January 2016 (both days inclusive); Miramar Tower 1808 and 1813 Premises: Two years seven months and sixteen days, commencing from 15 June 2013 to 31 January 2016 (both days inclusive); Miramar Tower 1814 Premises: Two years five months sixteen days, commencing from 16 August 2013 to 31 January 2016 (both days inclusive); Miramar Tower 1815 Premises, Miramar Tower 1816 Premises and Miramar Tower Premises: Two years four months fifteen days, commencing from 16 September 2013 to 31 January 2016 (both days inclusive); Miramar Tower Premises which is rented by a third party (not being a connected person of the Company) and is expired on 24 April 2014: One year nine months six days, commencing from 25 April 2014 to 31 January 2016 (both days inclusive). Rent and other charges : The rent payable on a monthly basis (exclusive of government rates, management fee and air-conditioning charges) during the term is HK$1,462,000.00; The aggregate monthly management fee and air-conditioning charges (subject to the periodic review or revision by Shahdan or its designated property manager) is HK$233,166.40; and Extra chilled water supply costs may be charged by Shahdan to Union Medical for additional chilled water supply required by Union Medical which is beyond the specified normal daily chilled water supply hours.

71 68 Report of the Directors Sublet : The tenant shall have the right to sublet part of the Premises to Paragon Clinic Limited, which is a third party (not being a Connected Person of the Company) or individual doctors provided prior written consent has been obtained from Shahdan. User : To be used as a clinic only. As Union Medical is a connected person of the Company, the entering into of the New Lease constituted continuing connected transaction for the Company under Chapter 14A of the Listing Rules. As the and 1812 Lease, the Lease, the 1808 and 1813 Lease, the 1814 Lease, the 1815 Lease, the 1816 Lease, the Lease and the New Lease were entered into by Shahdan with the same connected person and all eight leases were in respect of the premises in the same building and on the same floor, they were regarded as related transactions and therefore were treated as if they were one transaction pursuant to Rule 14A.25 of the Listing Rules. (12) On 6 June 2013, the Group entered into the following agreements with Henderson Property Agency Limited ( HPAL ) which constituted continuing connected transactions for the Company: (i) A tenancy agreement (the Renewal Tenancy Agreement ) entered into between Shahdan as landlord and HPAL as tenant; (ii) A licence agreement (the Renewal Podium Roof Licence Agreement ) entered into between Shahdan as licensor and HPAL as licensee; and (iii) A licence agreement (the Renewal Fan Room Licence Agreement ) entered into between Shahdan as licensor and HPAL as licensee. Details of the terms and conditions of the agreements are set out as follows: Details of the Renewal Tenancy Agreement Premises : Shop 3013, 3/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong (the Shop 3013 Premises ). Term : Three years commencing from 16 June 2013 to 15 June 2016, both days inclusive, provided that both the landlord and the tenant shall have the right to early terminate this tenancy by giving a notice of not less than three months to other party after 15 June Rent and other charges : (a) rent payable on a monthly basis (exclusive of Government rates, management fee, air-conditioning charges and promotion contribution) during the term is HK$594,400.00;

72 69 Annual Report 2013 Miramar Hotel and Investment Company, Limited (b) aggregate monthly management fee and air-conditioning charges (subject to the periodic review by Shahdan or its designated property manager) is HK$94,110.10; Extra chilled water supply costs may be charged by the landlord to the tenant for additional chilled water supply required by the tenant which is beyond the specified normal daily chilled water supply hours; (c) monthly promotion contribution, being 1% of the monthly rent of the Shop 3013 Premises (subject to periodic review by Shahdan) is HK$5,944.00; and (d) Government rates as per Government s assessment. User : To be used as a property agency only. Details of the Renewal Podium Roof Licence Agreement Podium Roof : Portion of Podium Roof, 3/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. Term : Three years commencing from 16 June 2013 to 15 June 2016, both days inclusive provided that both the licensor and the licensee shall have the right to early terminate this license by giving a notice of not less than three months to other party after 15 June Licence fee and other charges : (a) licence fee payable on a monthly basis (exclusive of Government rates and management fee) during the term is HK$213,500.00; (b) monthly management fee (subject to the periodic review by Shahdan or its designated property manager) is HK$11,939.70; and (c) Government rates as per Government s assessment. User : Restricted to legal usage only. Details of the Renewal Fan Room Licence Agreement Fan Room : Fan Room, 3/F., Miramar Shopping Centre, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. Term : Three years commencing from 16 June 2013 to 15 June 2016, both days inclusive, provided that both the licensor and the licensee shall have the right to early terminate this license by giving a notice of not less than three months to other party after 15 June 2014.

73 70 Report of the Directors Licence fee and other charges : (a) licence fee payable on a monthly basis (exclusive of Government rates) during the term is HK$42,200.00; and (b) Government rates as per Government s assessment. User : Restricted to legal usage only. As HREAL is a connected person of the Company, the entering into of the Renewal Tenancy Agreement, Renewal Podium Roof Licence Agreement and Renewal Fan Room Licence Agreement constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. (13) On 19 November 2013, Profit Advantage Limited as tenant entered into a New Sub-Lease with IFC Development Limited as landlord and certain floor space at the ifc Mall are also being licenced by the landlord to the tenant. Details of the terms and conditions are set out as follows: Premises : Shop Nos on Level Three of ifc Mall and certain floor space at ifc Mall. Term : Initial term of three years commencing from 7 July 2013 to 6 July 2016 (the Initial Term ) and, for the Licence, on an annual basis (and/or such shorter period as may be agreed between the landlord and the tenant) subject to termination upon termination of the New Sub-Lease. Rent and other charges : The rent payable on monthly basis (exclusive of rates, air-conditioning and management charges, promotional levy and all other outgoings) during the term shall be as follows: (a) From 7 July 2013 to 6 July 2016, basis rent in the sum of HK$836, per month together with turnover rent representing the amount by which 11% of the Gross Receipts exceeds the basic rent per month (the Turnover Rent ). (b) From 7 July 2016 to 6 July 2019, provided an option (as defined below) is exercised by the tenant, at open market rent provided that the basic rent shall not be less than HK$836, per month or more than HK$1,003, per month, together with the Turnover Rent. The aggregate air-conditioning and management charges and promotional levy payable on monthly basis in respect of the New Sub-Lease shall be approximately HK$435, per month (subject to review from time to time). The aggregate licence fee, air-conditioning and management charges and promotional levy payable on a monthly basis in respect of the Licence shall be approximately HK$9, per month (subject to review from time to time).

74 71 Annual Report 2013 Miramar Hotel and Investment Company, Limited Option : An option exercisable by the tenant at the expiry of the Initial Term on 6 July 2016 to renew the sub-lease of the ifc Premises for three years. The parties will enter into new agreement(s) upon the tenant exercising the renewal option. User : The ifc Premises shall be used for operating up-market restaurants. As the Landlord is an associate of Henderson Land, a substantial shareholder of the Company, it is a connected person of the Company under Rule 14A.11 of the Listing Rules and the entering into of the New Sub-Lease and Licence constituted continuing connected transactions for the Company under Chapter 14A of the Listing Rules. (14) On 5 December 2013, a lease agreement (the Mira Moon Lease Agreement ) was entered into between Intelligent House Limited as landlord (the Landlord ) and Mira Moon Limited, a wholly-owned subsidiary of the Company, as tenant (the Tenant ), whereby the Tenant had agreed to lease from the Landlord the premises upon the terms as detailed below: Premises : the Premises, being the remaining portion of section A of Marine Lot No.436 together with a building now known as MIRA MOON located at No.388 Jaffe Road, Wanchai, Hong Kong. Term : 10 years and 6 months, commencing from 21 November 2013 to 20 May 2024 (both days inclusive). Termination by sale and redevelopment : If, at any time during the Term, the Landlord shall resolve to (i) sell the Premises or any part of it; (ii) assign any of its rights and interests in the Premises or any part of it to any third party(ies); or (iii) re-develop the Premises or any part of it by demolition, rebuilding, renovation, refurbishment or otherwise, the Landlord shall have the right upon giving 6 months written notice to the Tenant to terminate the Mira Moon Lease Agreement; provided that such notice of termination shall not be given by the Landlord to the Tenant on or before the expiry date of the 5th year of the Term (i.e. on or before 30 June 2018). Rent : A base rent of HK$1,320, per month (the Base Rent ) plus the Additional Rent, which is calculated in the following manner: Additional Rent The Additional Rent in respect of each and every year of the Term (the Relevant Year ) for the Term ( Annual Additional Rent ) shall be: (i) where the Gross Annual Room Revenue is less than or equal to HK$80,000,000.00, the amount of the Additional Rent payable shall be 22.5% of the Gross Annual Room Revenue exceeding HK$15,840, for the Relevant Year; or

75 72 Report of the Directors (ii) where the Gross Annual Room Revenue is more than HK$80,000, but less than or equal to HK$100,000,000.00, the amount of the Additional Rent payable shall be 25% of the Gross Annual Room Revenue exceeding HK$15,840, for the Relevant Year; or (iii) where the Gross Annual Room Revenue is more than HK$100,000, but less than or equal to HK$130,000,000.00, the amount of the Additional Rent payable shall be 27.5% of the Gross Annual Room Revenue exceeding HK$15,840, for the Relevant Year; or (iv) where the Gross Annual Room Revenue is more than HK$130,000,000.00, the amount of the Additional Rent payable shall be 30% of the Gross Annual Room Revenue exceeding HK$15,840, for the Relevant Year. If the amount of Annual Additional Rent calculated based on the above formula is a negative figure, then no Annual Additional Rent shall be payable by the Tenant to the Landlord for that Relevant Year. The Annual Additional Rent in respect of any Relevant Year shall be paid annually in arrears by the Tenant to the Landlord within 90 days immediately following the end of the Relevant Year subject to the terms and conditions of the Mira Moon Lease Agreement. Food and Beverage Charges : The Tenant shall pay to the Landlord 15% of the monthly Food and Beverage Revenue of the Tenant s business at the Food and Beverage Outlets without any deduction (the Food and Beverage Charges ). Provisional Food and Beverage Charges in respect of any calendar month shall be paid in arrears by the Tenant in respect of the monthly Food and Beverage Revenue of the Tenant s business during the relevant calendar month by the 15th day of the immediately following calendar month. Within 90 days after the expiration of each calendar year, the Tenant shall supply a statement certified by its auditors or external accountants (the Certified Statement ) as to the actual amount of the Food and Beverage Revenue for the relevant calendar year. If the actual sum paid as provisional Food and Beverage Charges payable for any calendar month is less than the actual Food and Beverage Charges payable for the relevant calendar month calculated based on the Certified Statement, the shortfall shall be paid by the Tenant to the Landlord within 30 days of the Landlord s notice to the Tenant on such shortfall. If the actual sum paid as provisional Food and Beverage Charges payable for any calendar month is more than the actual Food and Beverage Charges payable for the relevant calendar month calculated based on the Certified Statement, such excess sum shall be refunded by the Landlord to the Tenant within 30 days of the Landlord s receipt of the Certified Statement.

76 73 Annual Report 2013 Miramar Hotel and Investment Company, Limited Rates, outgoings and other charges : The Tenant shall pay and discharge all rates, taxes, assessments, duties, impositions, charges and outgoings levied on the Premises by the Government of Hong Kong or other lawful authority, save that the Government rent and property tax in respect of the Premises shall be paid by the Landlord. The Tenant shall also pay to the suppliers and indemnify the Landlord against all deposits and charges in respect of electricity, gas, water and telephone and other services consumed or used at or in relation to the Premises. Deposit : A sum of HK$1,320, payable by the Tenant to the Landlord on the signing of the Mira Moon Lease Agreement. Rent-free period : Three respective rent free periods for a total of 6 months during the Term as follows: (i) the 3rd and 4th months of the Term (i.e. commencing from 21 January 2014 to 20 March 2014 (both days inclusive)); (ii) the 15th and 16th months of the Term (i.e. commencing from 21 January 2015 to 20 March 2015 (both days inclusive)); and (iii) the 27th and 28th months of the Term (i.e. commencing from 21 January 2016 to 20 March 2016 (both days exclusive)); during which the Tenant shall not be obliged to pay the Base Rent but shall pay the rates, all outgoings and utility charges in respect of the Premises. The Gross Annual Room Revenue received by the Tenant during each of the rent-free periods will be counted for the purpose of calculation of the Additional Rent for that relevant year of the Term and the Tenant shall also pay to the Landlord the Food and Beverage Charges during the rent-free periods. User : To use the Premises for the purpose of a high class hotel and providing such types of services that are normally provided by other high class hotels in Hong Kong. Commencement of business at the Premises : The Tenant shall commence business as a hotel at the Premises on or before 21 November 2013.

77 74 Report of the Directors Opening contribution : The Landlord shall contribute a sum in a total amount of HK$9.7 million towards the actual cost incurred by the Tenant in setting up a first class design hotel at the Premises and such Opening Contribution shall be paid by the Landlord to the Tenant within 60 days after signing of the Mira Moon Lease Agreement by the Tenant. Transfer of restaurant licence : At the expiration or sooner determination of the Term, the Tenant shall at the request of the Landlord assign or transfer or procure to assign or transfer the general restaurant licence and the liquor licence or related licences (collectively the Licences ) for operating the then existing Food and Beverage Outlets at the Premises to the Landlord or such person or corporation nominated by the Landlord without any consideration, compensation or payment. The Tenant shall not transfer or assign the Licences to any person or corporation for consideration or otherwise during the Term without the consent of the Landlord. All charges relating to the aforesaid assignment or transfer of the Licences shall be borne by the Landlord. Transfer of hotel licence : At the expiration or sooner determination of the Term, the Tenant shall at the request of the Landlord assign or transfer or procure and ensure the assignment or transfer of the hotel licence used in the operation of the Premises as a hotel (the Hotel Licence ) to the Landlord or such person or corporation nominated by the Landlord (the Transferee ) without any consideration, compensation or payment. Without the consent of the Landlord, the Tenant or the holder of the Hotel Licence shall not transfer or assign the Hotel Licence to any person or corporation for consideration or otherwise. All charges relating to the aforesaid assignment or transfer of the Hotel Licence shall be borne by the Landlord. As the Landlord is an indirect wholly-owned subsidiary of Henderson Land, which in turn a substantial shareholder of the Company, therefore the Landlord is a connected person of the Company under the Listing Rules. Accordingly, the entering into of the Mira Moon Lease Agreement constituted a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. (15) On 23 December 2013, the Company, Hong Kong and Kowloon Entertainment Company Limited ( HKKE ), a wholly-owned subsidiary of the Company, and Broadwin Int l Limited ( Broadwin ) entered into a sale and purchase agreement (the Prosperwell S&P Agreement ) in relation to the acquisition by Broadwin from the Company of 93% interest in the issued share capital of Prosperwell Properties Limited ( Prosperwell ) and the Company s rights and interests in the shareholder s loan owed by Prosperwell to the Company as at 23 December 2013 (the Shareholder s Loan ), and from HKKE of 7% interest in the issued share capital of Prosperwell at an aggregate initial consideration of HK$28,559, (subject to adjustments pursuant to the terms of the Prosperwell S&P Agreement). The adjusted consideration was determined to be HK$28,559, which has been fully paid by Broadwin to the Company. On 23 December 2013, the Company and Broadwin also entered into a sale and purchase agreement (the Gourmet S&P Agreement ) in relation to the acquisition by Broadwin from the Company of approximately 94.4% interest in the issued share capital of Gourmet Enterprises Limited at an initial consideration of HK$63,699, (subject to adjustments pursuant to the terms of the Gourmet S&P Agreement). The adjusted consideration was determined to be HK$63,699, which has been fully paid by Broadwin to the Company.

78 75 Annual Report 2013 Miramar Hotel and Investment Company, Limited Broadwin is an indirect wholly-owned subsidiary of Henderson Land which in turn is a substantial shareholder of the Company, therefore Broadwin is a connected person of the Company under the Listing Rules. Accordingly, the entering into of the Prosperwell S&P Agreement and the Gourmet S&P Agreement constitutes connected transactions of the Company under Chapter 14A of the Listing Rules. Annual Review of Continuing Connected Transactions The independent non-executive directors of the Company have reviewed the above-mentioned continuing connected transactions and confirmed that they have been entered into: (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) in accordance with the above relevant agreements governing them which terms are fair and reasonable and in the interests of the Company s shareholders as a whole. The auditors of the Company have reviewed the above-mentioned continuing connected transactions and confirmed in writing to the board of directors of the Company that they: (i) have received the approval of the board of directors of the Company; (ii) are in accordance with the pricing policies of the Group; (iii) have been entered into in accordance with the terms of the above relevant agreements governing the transactions; and (iv) have not exceeded the relevant cap amounts of such transactions as disclosed in the relevant announcements for the year ended 31 December Directors Interests in Contracts Apart from the material interest that some of the directors held in the contracts under the paragraph of the Continuing Connected Transactions and Connected Transactions, there were no contracts of significance which subsisted during or at the end of the financial year in which the Company or any subsidiary was a party and in which a director was interested, directly or indirectly, and the director s interest was material. Directors Interests in Competing Business The following directors are considered to have interests in businesses which compete or are likely to compete with the businesses of the Group pursuant to the Listing Rules: 1. Dr Lee Shau Kee, Mr Lee Ka Shing and Mr Colin Lam Ko Yin are also directors of Henderson Development and Henderson Land which, through their subsidiaries, are also engaged in the businesses of property investment, hotel management and operation and other related services. 2. Mr Eddie Lau Yum Chuen and Mr Alexander Au Siu Kee are also directors of Henderson Land which, through its subsidiaries, are also engaged in the businesses of property investment, hotel management and operation and other related services.

79 76 Report of the Directors 3. Dr Lee Shau Kee, Mr Colin Lam Ko Yin, Mr Eddie Lau Yum Chuen, Mr Norman Ho Hau Chong and Mr Alexander Au Siu Kee are also directors of Hong Kong Ferry (Holdings) Company Limited, the principal activities of this group include property development, property investment and travel business. As the board of directors of the Company is independent from the boards of the above-mentioned companies and none of the above directors controls the board of the Company, the Group is capable of carrying on its businesses independently of, and at arm s length from, the businesses of those companies. Purchase, Sale or Redemption of the Company s Listed Securities During the year ended 31 December 2013, neither the Company nor its subsidiaries has purchased, sold or redeemed any of the Company s listed securities. Bank Loans and Other Borrowings Particulars of bank loans and other borrowings of the Company and the Group at 31 December 2013 are set out in note 23 to the financial statements. Particulars of Loan Capital, Convertible Securities, Warrants or Options Issued by the Company and its Subsidiaries The Company and its subsidiaries have not issued, during the year ended 31 December 2013, any loan capital, convertible securities, warrants or options. Borrowing Cost Capitalisation No borrowing cost was capitalised by the Company and its subsidiaries during the year ended 31 December 2013 (2012: HK$Nil). Share Capital Details of the share capital during the year ended 31 December 2013 are set out in note 26(b) to the financial statements. Public Float As at the date of this report, the Company has maintained the prescribed public float under the Listing Rules, based on the information that is publicly available to the Company and within the knowledge of the directors. Reserves Movements in reserves during the year ended 31 December 2013 are set out in note 26(a) to the financial statements.

80 77 Annual Report 2013 Miramar Hotel and Investment Company, Limited Group s Five-Year Financial Summary A summary of the results and of the assets and liabilities of the Group for the last five financial years is set out on page 164. Group Properties Particulars of the major properties and property interests of the Group are shown on pages 165 to 166. Corporate Finance The Group maintains its conservative financial policy, with high liquidity and low gearing. Gearing, calculated by dividing consolidated total borrowings by consolidated total shareholders equity, is only 21% as at 31 December 2013 (at 31 December 2012: 19%). The Group conducts its business primarily in Hong Kong with the related cash flows, assets and liabilities being denominated mainly in Hong Kong dollars. The Group s primary foreign exchange exposure arises from its operation in mainland China as well as certain bank deposits which are denominated in RMB and equity and bond investments which are denominated in USD, GBP, EUR, SGD and JPY. Majority of the Group s financing facilities obtained are denominated in Hong Kong dollars and interests on bank loans and borrowings are chargeable mainly based on certain interest margin over the Hong Kong Interbank Offer Rate which is therefore of floating rate in nature. The Group has adequate credit facilities available to fund its development programme for the foreseeable future. At 31 December 2013, total available facilities amounted to approximately HK$3.0 billion (2012: approximately HK$2.7 billion), and 83% of that (2012: 74%) were utilised. At 31 December 2013, consolidated net cash were approximately HK$0.34 billion (2012: consolidated net borrowings of HK$0.06 billion), of which none was secured borrowings (2012: HK$0.08 billion). Employees As at 31 December 2013, the Group had a total of about 2,080 full-time employees, including 1,750 employed in Hong Kong, 330 employed in The People s Republic of China and the United States of America. The Group invests in its employees and remunerate them in a manner that supports the achievement of the Company mission, vision and strategic objectives. It is the policy of the Group to offers fair pay to employees in terms of their roles and responsibilities, merit and competencies within the organization; paying them at the appropriate level for the markets in which we operate. The Group adopts a performance culture in which employees are expected to deliver against challenging objectives and to reward them when they do. Employees can expect to receive regular feedback on their performance, to receive formal appraisals annually and to participate in the setting of their objectives. Under the existing system, our employees remuneration packages are rewarded on a performance-related basis.

81 78 Report of the Directors Training and Development It is our ongoing efforts to provide opportunities for people development and growth. The new Performance Management System was adopted to enhance overall performance standards and to cultivate the concept of reward for performance starting All team members have been engaged and knowing what is expected with alignment between company and individual goals to achieve the greatest benefit for individual and the company. We believe that human resources are the most important asset and we are committed to providing an environment in which our employees at all levels can excel and growth. At the beginning of 2013, an extensive Training and Development Needs Analysis covering all employees was carried out aimed at identifying the training and development needs. A comprehensive Corporate Training Curriculum was then developed for employees at different levels. Essential training programs like Business Knowledge Sharing, Technical Skills Training, Customer Services Training, Languages Training, People Management Training and Personal Effectiveness Training have been rolling out throughout the year. A Group-wide employee engagement survey was carried out in the 2nd half of the year to measure and advance our employee engagement level in 5 dimensions, including credibility, respect and fairness, as well as pride and camaraderie with 82% of all employees participating. The findings from the survey questions are the key indicators for our continuous efforts to provide a good and trust working environment to our employees. With the continuous efforts of people development, we have been awarded by the Employees Retraining Board on the renewing the honour of Manpower Developer in Audit Committee The Audit Committee has reviewed the financial results of the Group for the year ended 31 December 2013 and discussed with internal audit executives and independent external auditors matters on auditing, internal control and financial reports of the Group. Auditors KPMG retire and, being eligible, offer themselves for re-appointment. A resolution for the re-appointment of KPMG as auditors of the Company until the conclusion of the next Annual General Meeting is to be proposed at the forthcoming 2014 Annual General Meeting. By Order of the Board LEE SHAU KEE Chairman Hong Kong, 18 March 2014

82 79 Annual Report 2013 Miramar Hotel and Investment Company, Limited Independent Auditor s Report Independent auditor s report to the shareholders of Miramar Hotel and Investment Company, Limited (Incorporated in Hong Kong with limited liability) We have audited the consolidated financial statements of Miramar Hotel and Investment Company, Limited ( the Company ) and its subsidiaries (together the Group ) set out on pages 81 to 163, which comprise the consolidated and company balance sheets as at 31 December 2013, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information. Directors responsibility for the consolidated financial statements The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely to you, as a body, in accordance with section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

83 80 Independent Auditor s Report Opinion In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2013 and of the Group s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong Hong Kong, 18 March 2014

84 81 Annual Report 2013 Miramar Hotel and Investment Company, Limited Consolidated Income Statement for the year ended 31 December Note HK$ 000 HK$ 000 Turnover 10 3,044,459 2,973,859 Cost of inventories (297,800) (405,793) Staff costs 3(a) (525,308) (481,724) Utilities, repairs and maintenance and rent (183,837) (163,308) Tour and ticketing costs (1,076,918) (1,002,469) Gross profit 960, ,565 Other revenue 76,884 78,727 Operating and other expenses (289,340) (305,875) Depreciation (148,025) (131,693) 600, ,724 Finance costs 3(b) (30,487) (30,259) Share of profits less losses of associates 13 (339) (670) Share of profit of a joint venture , ,537 Net gain on disposal of properties 38,783 41,879 Net gain on disposal of subsidiaries 32 48,241 Net gain on trading securities/available-for-sale securities 2,257 13,068 Net increase in fair value of investment properties 11(a) 799, ,079 Profit before taxation 3 1,459,083 1,515,563 Taxation Current 4(a) (114,043) (79,038) Deferred 4(a) (43,000) (28,946) Profit for the year 1,302,040 1,407,579 Attributable to: Shareholders of the Company 7 1,277,889 1,377,111 Non-controlling interests 24,151 30,468 1,302,040 1,407,579 Earnings per share basic and diluted 9 HK$2.21 HK$2.39 The notes on pages 92 to 163 form part of these financial statements. Details of dividends payable to shareholders of the Company attributable to the profit for the year are set out in note 8(a).

85 82 Consolidated Statement of Comprehensive Income for the year ended 31 December HK$ 000 HK$ 000 Profit for the year 1,302,040 1,407,579 Other comprehensive income for the year (after tax and reclassification adjustments): Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of the financial statements of overseas subsidiaries 16,657 6,504 Available-for-sale securities: changes in fair value 13,736 7,246 transfer to profit or loss upon disposal 844 transfer to profit or loss upon impairment ,530 13,750 Total comprehensive income for the year 1,333,570 1,421,329 Attributable to: Shareholders of the Company 1,305,544 1,389,971 Non-controlling interests 28,026 31,358 Total comprehensive income for the year 1,333,570 1,421,329 There is no tax effect relating to the above component of other comprehensive income. The notes on pages 92 to 163 form part of these financial statements.

86 83 Annual Report 2013 Miramar Hotel and Investment Company, Limited Consolidated Balance Sheet at 31 December 2013 Non-current assets Note HK$ 000 HK$ 000 Fixed assets Investment properties 11(a) 11,078,791 10,535,158 Other fixed assets 11(a) 1,067, ,641 12,146,046 11,379,799 Interest in associates 13 1,816 2,102 Interest in a joint venture 14 10,017 7,692 Available-for-sale securities , ,234 Deferred tax assets 25(b)(iii) 2,774 33,608 12,568,182 11,673,435 Current assets Properties under development for sale 16 62,297 Inventories , ,634 Trade and other receivables , ,127 Available-for-sale securities 15 33,940 31,977 Trading securities 19 7,238 2,828 Cash and bank balances 20 2,874,785 1,992,253 Tax recoverable 25(a) 22,155 15,924 3,395,042 2,628,040 Current liabilities Trade and other payables 21 (616,420) (520,661) Bank loans and overdrafts 23 (798,127) (965,513) Sales and rental deposits received (185,888) (161,638) Tax payable 25(a) (39,412) (29,166) (1,639,847) (1,676,978) Net current assets 1,755, ,062 Total assets less current liabilities carried forward 14,323,377 12,624,497

87 84 Consolidated Balance Sheet (continued) at 31 December Note HK$ 000 HK$ 000 Total assets less current liabilities brought forward 14,323,377 12,624,497 Non-current liabilities Bank loans 23 (1,691,652) (1,041,182) Deferred liabilities 24 (126,789) (117,239) Amounts due to holders of non-controlling interests of a subsidiary 22 (47,438) Deferred tax liabilities 25(b)(iii) (232,601) (218,152) (2,051,042) (1,424,011) NET ASSETS 12,272,335 11,200,486 CAPITAL AND RESERVES Share capital 26(b) 404, ,062 Reserves 11,731,691 10,668,584 Total equity attributable to shareholders of the Company 12,135,753 11,072,646 Non-controlling interests 136, ,840 TOTAL EQUITY 12,272,335 11,200,486 Approved and authorised for issue by the board of directors on 18 March 2014 LEE SHAU KEE Chairman LEE KA SHING CEO The notes on pages 92 to 163 form part of these financial statements.

88 85 Annual Report 2013 Miramar Hotel and Investment Company, Limited Balance Sheet at 31 December 2013 Non-current assets Note HK$ 000 HK$ 000 Fixed assets Investment properties 11(b) 236,315 Other fixed assets 11(b) 305,212 18, , ,472 Interests in subsidiaries 12 2,320,125 2,778,795 Interests in associates ,625,416 3,033,333 Current assets Inventories 17 3,491 5,217 Trade and other receivables 18 23,934 27,566 Cash and bank balances 20 2,224,945 1,396,516 2,252,370 1,429,299 Current liabilities Trade and other payables 21 (131,674) (92,832) Bank loans and overdrafts 23 (85,000) (288,836) Deposits received (351) (1,499) (217,025) (383,167) Net current assets 2,035,345 1,046,132 Total assets less current liabilities carried forward 4,660,761 4,079,465

89 86 Balance Sheet (continued) at 31 December Note HK$ 000 HK$ 000 Total assets less current liabilities brought forward 4,660,761 4,079,465 Non-current liabilities Amounts due to subsidiaries 12 (2,121,580) (1,604,097) Bank loans 23 (248,156) Deferred tax liabilities 25(b)(iii) (8,123) (2,369,736) (1,612,220) NET ASSETS 2,291,025 2,467,245 CAPITAL AND RESERVES Share capital 26(b) 404, ,062 Reserves 1,886,963 2,063,183 TOTAL EQUITY 26(a) 2,291,025 2,467,245 Approved and authorised for issue by the board of directors on 18 March 2014 LEE SHAU KEE Chairman LEE KA SHING CEO The notes on pages 92 to 163 form part of these financial statements.

90 87 Annual Report 2013 Miramar Hotel and Investment Company, Limited Consolidated Statement of Changes in Equity for the year ended 31 December 2013 Attributable to shareholders of the Company Share capital Share premium Capital reserve Exchange reserve General reserve Investment revaluation reserve Retained profits Total Noncontrolling interests Total equity Note HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Balance at 1 January , ,628 (91,086) 133, ,827 4,557 8,864,038 9,907, ,887 10,012,467 Changes in equity for 2012: Profit for the year 1,377,111 1,377,111 30,468 1,407,579 Other comprehensive income 5,614 7,246 12, ,750 Total comprehensive income 5,614 7,246 1,377,111 1,389,971 31,358 1,421,329 Final dividends approved in respect of the previous year 8(b) (132,763) (132,763) (132,763) Interim dividends declared in respect of the current year 8(a) (92,357) (92,357) (92,357) Increase in non-controlling interests attributable to a decrease in shareholding of a subsidiary (215) Dividends paid to non-controlling interests (8,190) (8,190) Balance at 31 December , ,628 (91,086) 139, ,827 11,803 10,016,244 11,072, ,840 11,200,486

91 88 Consolidated Statement of Changes in Equity (continued) for the year ended 31 December 2013 Attributable to shareholders of the Company Share Share Capital Exchange Investment General revaluation Retained Noncontrolling Total capital premium reserve reserve reserve reserve profits Total interests equity Note HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Balance at 1 January , ,628 (91,086) 139, ,827 11,803 10,016,244 11,072, ,840 11,200,486 Changes in equity for 2013: Profit for the year 1,277,889 1,277,889 24,151 1,302,040 Other comprehensive income 12,782 14,873 27,655 3,875 31,530 Total comprehensive income 12,782 14,873 1,277,889 1,305,544 28,026 1,333,570 Final dividends approved in respect of the previous year 8(b) (144,308) (144,308) (144,308) Interim dividends declared in respect of the current year 8(a) (98,129) (98,129) (98,129) Dividends paid to non-controlling interests (15,000) (15,000) Liquidation of a subsidiary (2,515) (2,515) Disposal of a subsidiary 32 (1,769) (1,769) Balance at 31 December , ,628 (91,086) 151, ,827 26,676 11,051,696 12,135, ,582 12,272,335 The notes on pages 92 to 163 form part of these financial statements.

92 89 Annual Report 2013 Miramar Hotel and Investment Company, Limited Consolidated Cash Flow Statement for the year ended 31 December 2013 Operating activities Note HK$ 000 HK$ 000 Profit before taxation 1,459,083 1,515,563 Adjustments for: Interest income from unlisted debt securities (19,549) (2,806) Bank interest income (29,446) (28,210) Net loss on disposal of other fixed assets 1,392 4,928 Impairment loss on trade receivables 3,148 2,979 Impairment loss on merchandised goods 29,567 18,108 Reversal of provision for properties held for resale (1,947) Depreciation 148, ,693 Finance costs 30,487 30,259 Share of profits less losses of associates Share of profit of a joint venture (703) (742) Net gain on disposal of properties (38,783) (41,879) Net gain on disposal of subsidiaries 32 (48,241) Net loss on disposal of an associate 38 Net realised and unrealised gains on trading securities (3,394) (13,068) Impairment loss on available-for-sale securities 293 Net loss on disposal of available-for-sale securities 844 Net increase in fair value of investment properties (799,810) (929,079) Exchange differences (18,344) (2,285) Operating profit before changes in working capital 712, ,169 Decrease in properties under development for sale 62, ,007 Decrease/(increase) in inventories 6,791 (43,969) Decrease in trade and other receivables 29,779 14,953 Increase in amounts due from associates (53) (52) Increase in amount due from a joint venture (1,622) (1,351) Increase in amount due to an associate 2,327 6,061 Increase/(decrease) in trade and other payables 35,582 (35,129) Increase in sales and rental deposits received 24,622 32,553 Increase/(decrease) in deferred liabilities 9,550 (7,377) Payment for purchase of trading securities (167,255) (185,627) Proceeds from disposal of trading securities 166, ,144 Cash generated from operations carried forward 881, ,382

93 90 Consolidated Cash Flow Statement (continued) for the year ended 31 December Note HK$ 000 HK$ 000 Cash generated from operations brought forward 881, ,382 Bank interest received 46,853 21,241 Interest and other borrowing costs paid (31,385) (27,131) Dividends paid (242,437) (225,120) Dividends paid to non-controlling interests (15,000) (8,190) Tax paid Hong Kong Profits Tax paid (98,693) (66,608) Hong Kong Profits Tax refunded 384 1,031 Overseas tax paid (11,706) (21,770) Net cash generated from operating activities 529, ,835 Investing activities Payment for purchase of investment properties (11,689) (3,464) Payment for purchase of other fixed assets (115,562) (47,000) Payment for purchase of available-for-sale securities (159,328) (238,022) Proceeds from disposal of available-for-sale securities 12,317 Proceeds from disposal of other fixed assets 2, Proceeds from disposal of an associate 1,086 Net cash inflow from disposal of subsidiaries 32 91,853 Proceeds from disposal of properties 40,545 76,725 Increase in time deposits with maturity more than three months (402,464) (575,869) Net cash used in investing activities (542,132) (786,073) Financing activities Proceeds from new bank loans 8,480,397 6,078,096 Repayment of bank loans (7,987,973) (5,745,520) Repayment of advances from holders of non-controlling interests of subsidiaries (7,446) (25,822) Net cash generated from financing activities 484, ,754

94 91 Annual Report 2013 Miramar Hotel and Investment Company, Limited Consolidated Cash Flow Statement (continued) for the year ended 31 December Note HK$ 000 HK$ 000 Net increase in cash and cash equivalents 472, ,516 Cash and cash equivalents at 1 January 591, ,425 Effect of foreign exchange rate changes 13,559 2,283 Cash and cash equivalents at 31 December 1,076, ,224 Analysis of the balances of cash and cash equivalents at 31 December Cash and bank balances 20 2,874,785 1,992,253 Bank overdrafts 23 (4,043) (9,614) Less: Time deposits with maturity more than three months (1,793,879) (1,391,415) 1,076, ,224 The notes on pages 92 to 163 form part of these financial statements.

95 92 Notes to the Financial Statements 1 Significant accounting policies (a) Statement of compliance These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ( HKFRSs ), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ( HKASs ) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted by the Group is set out below. The HKICPA has issued certain new and revised HKFRSs that are first effective for the current accounting period of the Group and the Company. Note 1(c) provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements. (b) Basis of preparation of the financial statements The consolidated financial statements for the year ended 31 December 2013 comprise Miramar Hotel and Investment Company, Limited (the Company ) and its subsidiaries (together referred to as the Group ) and the Group s interest in associates and a joint venture. The measurement basis used in the preparation of the financial statements is the historical cost basis except that the following assets are stated at their fair value as explained in the accounting policies set out below: investment property (see note 1(h)); and financial instruments classified as available-for-sale securities or as trading securities (see note 1(g)). The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in note 2.

96 93 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (c) Changes in accounting policies The HKICPA has issued a number of new HKFRSs and amendments to HKFRSs that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group s financial statements: Amendments to HKAS 1, Presentation of financial statements Presentation of items of other comprehensive income HKFRS 10, Consolidated financial statements HKFRS 11, Joint arrangements HKFRS 12, Disclosure of interests in other entities HKFRS 13, Fair value measurement Amendments to HKAS 1, Presentation of financial statements Presentation of items of other comprehensive income The amendments to HKAS 1 require entities to present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The presentation of other comprehensive income in the consolidated statement of comprehensive income in these financial statements has been modified accordingly. HKFRS 10, Consolidated financial statements HKFRS 10 replaces the requirements in HKAS 27, Consolidated and separate financial statements relating to the preparation of consolidated financial statements and HK-SIC 12 Consolidation Special purpose entities. It introduces a single control model to determine whether an investee should be consolidated, by focusing on whether the entity has power over the investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its power to affect the amount of those returns. As a result of the adoption of HKFRS 10, the Group has changed its accounting policy with respect to determining whether it has control over an investee. The adoption does not change any of the control conclusions reached by the Group in respect of its involvement with other entities as at 1 January 2013.

97 94 Notes to the Financial Statements 1 Significant accounting policies (Continued) (c) Changes in accounting policies (continued) HKFRS 11, Joint arrangements HKFRS 11, which replaces HKAS 31, Interests in joint ventures, divides joint arrangements into joint operations and joint ventures. Entities are required to determine the type of an arrangement by considering the structure, legal form, contractual terms and other facts and circumstances relevant to their rights and obligations under the arrangement. Joint arrangements which are classified as joint operations under HKFRS 11 are recognised on a line-by-line basis to the extent of the joint operator s interest in the joint operation. All other joint arrangements are classified as joint ventures under HKFRS 11 and are required to be accounted for using the equity method in the Group s consolidated financial statements. Proportionate consolidation is no longer allowed as an accounting policy choice. As a result of the adoption of HKFRS 11, the Group has changed its accounting policy with respect to its interests in joint arrangements and re-evaluated its involvement in its joint arrangements. The Group has reclassified the investment from jointly controlled entity to joint venture. The investment continues to be accounted for using the equity method and therefore this reclassification does not have any material impact on the financial position and the financial result of the Group. HKFRS 12, Disclosure of interests in other entities HKFRS 12 brings together into a single standard all the disclosure requirements relevant to an entity s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The disclosures required by HKFRS 12 are generally more extensive than those previously required by the respective standards. To the extent that the requirements are applicable to the Group, the Group has provided those disclosures in notes 12, 13 and 14. HKFRS 13, Fair value measurement HKFRS 13 replaces existing guidance in individual HKFRSs with a single source of fair value measurement guidance. HKFRS 13 also contains extensive disclosure requirements about fair value measurements for both financial instruments and non-financial instruments. To the extent that the requirements are applicable to the Group, the Group has provided those disclosures in note 11. The adoption of HKFRS 13 does not have any material impact on the fair value measurements of the Group s assets and liabilities. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

98 95 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (d) Subsidiaries and non-controlling interests Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered. An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at non-controlling interests proportionate share of the subsidiary s net identifiable assets. Non-controlling interests are presented in the consolidated balance sheet within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statement and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated balance sheet in accordance with notes 1(n) or (o) depending on the nature of the liability. Changes in the Group s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised. When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see note 1(g)) or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture (see note 1(e)). In the Company s balance sheet, an investment in a subsidiary is stated at cost less impairment losses (see note 1(k)), unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).

99 96 Notes to the Financial Statements 1 Significant accounting policies (Continued) (e) Associates and joint ventures An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions. A joint venture is an arrangement whereby the Group or Company and other parties contractually agree to share control of the arrangement, and have rights to the net assets of the arrangement. An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group s share of the acquisition-date fair values of the investee s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group s share of the investee s net assets and any impairment loss relating to the investment (see notes 1(f) and (k)). Any excess of acquisition date fair value over cost, the Group s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the consolidated income statement, whereas the Group s share of the post-acquisition post-tax items of the investees other comprehensive income is recognised in the consolidated statement of comprehensive income. When the Group s share of losses exceeds its interest in the associate or the joint venture, the Group s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group s interest is the carrying amount of the investment under the equity method together with the Group s long-term interests that in substance form part of the Group s net investment in the associate or the joint venture. Unrealised profits and losses resulting from transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group s interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss. If an investment in an associate becomes an investment in a joint venture or vice versa, retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method. In all other cases, when the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see note 1(g)). In the Company s balance sheet, investments in associates and joint ventures are stated at cost less impairment losses (see note 1(k)), unless classified as held for sale (or included in a disposal group that is classified as held for sale).

100 97 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (f) Goodwill Goodwill represents the excess of: (i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group s previously held equity interest in the acquiree; over (ii) the net fair value of the acquiree s identifiable assets and liabilities measured as at the acquisition date. When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase. Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see note 1(k)). On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal. (g) Other investments in debt and equity securities The Group s and the Company s policies for investments in debt and equity securities, other than investments in subsidiaries, associates and joint ventures, are as follows: Investments in debt and equity securities are initially stated at fair value, which is their transaction price unless it is determined that fair value at initial recognition differs from the transaction price and that fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation technique that uses only data from observable markets. Cost includes attributable transaction costs, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification: Investments in securities held for trading are classified as current assets. Any attributable transaction costs are recognised in profit or loss as incurred. At the balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised in profit or loss. The net gain or loss recognised in profit or loss does not include any dividends or interest earned on these investments as these are recognised in accordance with the policies set out in notes 1(t)(v) and (vi).

101 98 Notes to the Financial Statements 1 Significant accounting policies (Continued) (g) Other investments in debt and equity securities (continued) Investments in securities which do not fall into any of the above categories are classified as availablefor-sale securities. At the balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised in other comprehensive income and accumulated separately in equity in the fair value reserve. As an exception to this, investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured are recognised in the balance sheet at cost less impairment losses (see note 1(k)). Dividend income from equity securities and interest income from debt securities calculated using the effective interest method are recognised in profit or loss in accordance with the policies set out in notes 1(t)(v) and (vi), respectively. Foreign exchange gains and losses resulting from changes in the amortised cost of debt securities are also recognised in profit or loss. When the investments are derecognised or impaired (see note 1(k)), the cumulative gain or loss recognised in equity is reclassified to profit or loss. Investments are recognised/derecognised on the date the Group commits to purchase/sell the investments or they expire. (h) Investment property Investment properties are land and/or buildings which are owned or held under a leasehold interest (see note 1(j)) to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use and property that is being constructed or developed for future use as investment property. Investment properties are stated at fair value, unless they are still in the course of construction or development at the balance sheet date and their fair value cannot be reliably measured at that time. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in profit or loss. Rental income from investment properties is accounted for as described in note 1(t)(i). When the Group holds a property interest under an operating lease to earn rental income and/or for capital appreciation, the interest is classified and accounted for as an investment property on a propertyby-property basis. Any such property interest which has been classified as an investment property is accounted for as if it were held under a finance lease (see note 1(j)), and the same accounting policies are applied to that interest as are applied to other investment properties leased under finance leases. Lease payments are accounted for as described in note 1(j).

102 99 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (i) Other fixed assets The following items of other fixed assets are stated at cost less accumulated depreciation and impairment losses (see note 1(k)): buildings held for own use which are situated on leasehold land and classified as held under operating leases (see note 1(j)); hotel property; and machinery, furniture, fixtures and equipment. Gains or losses arising from the retirement or disposal of an item of other fixed assets are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal. Depreciation is calculated to write off the cost of items of other fixed assets, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows: leasehold land is depreciated over the remaining term of the lease; buildings including hotel property situated on leasehold land are depreciated over the unexpired term of the lease; and machinery, furniture, fixtures and equipment 4 10 years Both the useful life of an asset and its residual value, if any, are reviewed annually. Hotel property under construction is stated at cost less any impairment until construction or development is complete, at which time it is reclassified to hotel property.

103 100 Notes to the Financial Statements 1 Significant accounting policies (Continued) (j) Leased assets An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease. (i) Classification of assets leased to the Group Assets that are held by Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, with the following exceptions: property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (see note 1(h)); and land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee. (ii) Assets held for use in operating leases When the Group leases out assets under operating leases, the assets are included in the balance sheet according to their nature. Revenue arising from operating leases is recognised in accordance with the Group s revenue recognition policies as set out in note 1(t)(i). (iii) Operating lease charges Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred. The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term except where the property is classified as an investment property (see note 1(h)) or is held for development for sale (see note 1(l)(ii)).

104 101 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (k) Impairment of assets (i) Impairment of investments in debt and equity securities and other receivables Investments in debt and equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale securities are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events: significant financial difficulty of the debtor; a breach of contract, such as a default or delinquency in interest or principal payments; it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost. If any such evidence exists, any impairment loss is determined and recognised as follows: For investments in associates and joint ventures accounted for under the equity method in the consolidated financial statements (see note 1(e)), the impairment loss is measured by comparing the recoverable amount of the investment as a whole with its carrying amount in accordance with note 1(k)(ii). The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with note 1(k)(ii). For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities carried at cost are not reversed.

105 102 Notes to the Financial Statements 1 Significant accounting policies (Continued) (k) Impairment of assets (continued) (i) Impairment of investments in debt and equity securities and other receivables (continued) For trade and other receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group. If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years. For available-for-sale securities, the cumulative loss that has been recognised in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss. Impairment losses recognised in profit or loss in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised in other comprehensive income. Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversals of impairment losses in such circumstances are recognised in profit or loss. Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

106 103 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (k) Impairment of assets (continued) (ii) Impairment of other assets Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased: fixed assets; goodwill; and investments in subsidiaries, associates and joint ventures in the Company s balance sheet. If any such indication exists, the asset s recoverable amount is estimated. In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment. Calculation of recoverable amount The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit). Recognition of impairment losses An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cashgenerating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable). Reversals of impairment losses In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. A reversal of an impairment loss is limited to the asset s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

107 104 Notes to the Financial Statements 1 Significant accounting policies (Continued) (k) Impairment of assets (continued) (iii) Interim financial reporting and impairment Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with HKAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (see notes 1(k)(i) and (ii)). Impairment losses recognised in an interim period in respect of goodwill, available-for-sale equity securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of the annual period, or in any other period subsequently, the increase is recognised in other comprehensive income and not profit or loss. (l) Inventories (i) Consumable stores and merchandised goods Inventories are carried at the lower of cost and net realisable value. Cost is calculated using the first-in-first-out formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to completion and the estimated costs necessary to make the sale. When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the writedown or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

108 105 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (l) Inventories (continued) (ii) Property development Inventories in respect of property development activities are carried at the lower of cost and net realisable value. Cost and net realisable values are determined as follows: Properties under development for sale The cost of properties under development for sale comprises specifically identified cost, including the acquisition cost of land, aggregate cost of development, materials and supplies, wages and other direct expenses, an appropriate proportion of overheads and borrowing costs capitalised (see note 1(v)). Net realisable value represents the estimated selling price less estimated costs of completion and costs to be incurred in selling the property. Properties held for resale In the case of properties developed by the Group, cost is determined by apportionment of the total development costs for that development project, attributable to the unsold properties. Net realisable value represents the estimated selling price less costs to be incurred in selling the property. The cost of properties held for resale comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. (m) Trade and other receivables Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less allowance for impairment of doubtful debts (see note 1(k)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts. (n) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method. (o) Trade and other payables Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with note 1(s)(i), trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

109 106 Notes to the Financial Statements 1 Significant accounting policies (Continued) (p) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are within three months of maturity at acquisition and are readily convertible into known amounts of cash with insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement. (q) Employee benefits Short term employee benefits and contributions to defined contribution retirement plans Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. (r) Income tax Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits. Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

110 107 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (r) Income tax (continued) The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future. Where investment properties are carried at their fair value in accordance with the accounting policy set out in note 1(h), the amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the balance sheet date unless the property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the property over time, rather than through sale. In all other cases, the amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted. The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available. Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised. Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met: in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either: the same taxable entity; or different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

111 108 Notes to the Financial Statements 1 Significant accounting policies (Continued) (s) Financial guarantees issued, provisions and contingent liabilities (i) Financial guarantees issued Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the holder ) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Where the Group issues a financial guarantee, the fair value of the guarantee is initially recognised as deferred income within trade and other payables. The fair value of financial guarantees issued at the time of issuance is determined by reference to fees charged in an arm s length transaction for similar services, when such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income. The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with note 1(s)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation. (ii) Other provisions and contingent liabilities Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

112 109 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (t) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows: (i) (ii) Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned. Revenue arising from the sale of properties held for resale is recognised upon the later of the signing of the sale and purchase agreement and the completion of the properties, which is taken to be the point in time when the risks and rewards of ownership of the property have passed to the buyer. Revenue arising from properties under development is recognised upon the transfer of legal titles. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the balance sheet under sales deposits and instalments received. (iii) Revenue from sale of merchandised goods is recognised when goods are delivered to the customers which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts. (iv) Income from hotel, food and beverage, travel operations and management services is recognised when the relevant services are provided. (v) Dividend income from unlisted investments is recognised when the shareholder s right to receive payment is established. Dividend income from listed investments is recognised when the share price of the investment goes ex-dividend. (vi) Interest income is recognised as it accrues using the effective interest method. (u) Translation of foreign currencies Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured.

113 110 Notes to the Financial Statements 1 Significant accounting policies (Continued) (u) Translation of foreign currencies (continued) The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Balance sheet items, including goodwill arising on consolidation of foreign operations acquired on or after 1 January 2005, are translated into Hong Kong dollars at the closing foreign exchange rates at the balance sheet date. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve. Goodwill arising on consolidation of a foreign operation acquired before 1 January 2005 is translated at the foreign exchange rate that applied at the date of acquisition of the foreign operation. On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from equity to profit or loss when the profit or loss on disposal is recognised. (v) Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. Other borrowing costs are expensed in the period in which they are incurred. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset are being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete. (w) Related parties (a) A person, or a close member of that person s family, is related to the Group if that person: (i) (ii) has control or joint control over the Group; has significant influence over the Group; or (iii) is a member of the key management personnel of the Group or the Group s parent.

114 111 Annual Report 2013 Miramar Hotel and Investment Company, Limited 1 Significant accounting policies (Continued) (w) Related parties (continued) (b) An entity is related to the Group if any of the following conditions applies: (i) (ii) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity. (x) Segment reporting Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group s various lines of business and geographical locations. Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

115 112 Notes to the Financial Statements 2 Critical accounting judgements and key sources of estimation uncertainty In the process of applying the Group s accounting policies, management has made the following judgements: Valuation of investment properties Investment properties are included in the balance sheet at their market value, which are assessed annually by external qualified valuers, after taking into consideration the net rental income allowing for reversionary income potential. The fair value of investment properties reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the investment properties. Assessment of the useful economic lives for depreciation of other fixed assets The Group depreciates other fixed assets in accordance with depreciation policy as set out in note 1(i). The estimated useful lives reflect the directors estimate of the periods during which the Group intends to derive future economic benefits from the use of these assets. Assessment of provision for properties held under development and for resale Management determines the net realisable value of properties held under development and for resale by using the prevailing market data such as most recent sale transactions and market survey reports available from independent property valuers. Management s assessment of net realisable value of properties held under development and for resale requires judgement as to the anticipated sale prices with reference to the recent sale transactions in nearby locations and the related costs to be incurred in selling the property. The Group s estimates may not be accurate and might need to be adjusted in later periods. Impairment of interest in subsidiaries In considering the impairment losses that may be required for the Company s interest in subsidiaries, recoverable amount of the assets needs to be determined. The recoverable amount is the greater of the fair value less costs of disposal and the value in use. It is difficult to precisely estimate selling price because quoted market prices for these assets may not be readily available. In determining the value in use, expected cash flows generated by the assets are discounted to their present value, which requires significant judgement relating to items such as level of turnover and amount of operating costs of the subsidiaries. The Company uses all readily available information in determining an amount that is reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of items such as turnover and operating costs of subsidiaries.

116 113 Annual Report 2013 Miramar Hotel and Investment Company, Limited 3 Profit before taxation Profit before taxation is arrived at after charging/(crediting): HK$ 000 HK$ 000 (a) Staff costs Contributions to defined contribution plan 16,024 15,544 Salaries, wages and other benefits 509, , , ,724 The Group participates in a Mandatory Provident Fund Scheme (the MPF scheme ) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement plan administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% (2012: 5%) of the employees relevant income, subject to a cap of monthly relevant income of HK$25,000 (HK$20,000 prior to June 2012). Contributions to the plan vest immediately. (b) Finance costs Interest on bank advances and other borrowings repayable within five years 25,157 26,247 Other borrowing costs 5,330 4,012 30,487 30,259 (c) Others Auditors remuneration 4,420 4,693 Net foreign exchange gain (16,255) (5,288) Net loss on disposal of other fixed assets 1,392 4,928 Operating lease charges: minimum lease payments property rentals 76,220 64,251 Rentals receivable from investment properties less direct outgoings of HK$50,576,000 (2012: HK$50,576,000) (568,190) (545,757) Other rental income less direct outgoings of HK$7,066,000 (2012: HK$1,522,000) (115,953) (92,236) Dividend income from listed securities (1,344) (3,287) Bank interest income (29,446) (28,210) Interest income from unlisted debt securities (19,549) (2,806) Net loss on disposal of an associate 38 Impairment loss on trade receivables (note 18(b)) 3,148 2,979 merchandised goods 29,567 18,108 Reversal of provision for properties held for resale (1,947) Net realised and unrealised gains on trading securities (3,394) (13,068) Impairment loss on available-for-sale securities 293 Net loss on disposal of available-for-sale securities 844

117 114 Notes to the Financial Statements 4 Taxation in the consolidated income statement (a) Taxation in the consolidated income statement represents: HK$ 000 HK$ 000 Current tax Hong Kong Profits Tax Provision for the year 108,804 71,154 Over-provision in respect of prior years (233) (370) 108,571 70,784 Current tax Overseas Provision for the year 5,472 5,358 Under-provision in respect of prior years 2,896 5,472 8,254 Deferred tax Change in fair value of investment properties 5, Origination and reversal of temporary differences 37,655 28,930 43,000 28, , ,984 Provision for Hong Kong Profits Tax is calculated at 16.5% (2012: 16.5%) of the estimated assessable profits for the year. Overseas taxation is calculated at rates of tax applicable in countries in which the Group is assessed for tax. Share of associates taxation for the year ended 31 December 2013 of HK$7,000 (2012: HK$7,000) is included in the share of profits less losses of associates. Share of a joint venture s taxation for the year ended 31 December 2013 of HK$148,000 (2012: HK$34,000) is included in the share of profit of a joint venture.

118 115 Annual Report 2013 Miramar Hotel and Investment Company, Limited 4 Taxation in the consolidated income statement (Continued) (b) Reconciliation between tax expense and profit before taxation at applicable tax rates: HK$ 000 HK$ 000 Profit before taxation 1,459,083 1,515,563 Notional tax on profit before taxation, calculated at the rates applicable to profits in the countries concerned 263, ,432 Tax effect of non-deductible expenses 16,939 11,886 Tax effect of non-taxable income (148,695) (170,509) Tax effect of unused tax losses not recognised in the year 48,246 26,826 Tax effect of tax losses not recognised in prior years utilised this year (23,450) (177) (Over)/under-provision in prior years (233) 2,526 Others 539 Actual tax expense 157, ,984

119 116 Notes to the Financial Statements 5 Directors remuneration Directors remuneration disclosed pursuant to section 161 of the Hong Kong Companies Ordinance is as follows: 2013 Salaries, Directors fees allowances and benefits in kind Discretionary bonuses Retirement scheme contributions Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Board of directors Dr Lee Shau Kee Mr Lee Ka Shing Dr Patrick Fung Yuk Bun Mr Dominic Cheng Ka On Mr Richard Tang Yat Sun Mr Colin Lam Ko Yin Mr Eddie Lau Yum Chuen Mr Norman Ho Hau Chong Mr Alexander Au Siu Kee Independent non-executive directors Dr David Sin Wai Kin Mr Wu King Cheong Dr Timpson Chung Shui Ming Mr Howard Yeung Ping Leung Mr Thomas Liang Cheung Biu ,700 1,700

120 117 Annual Report 2013 Miramar Hotel and Investment Company, Limited 5 Directors remuneration (Continued) 2012 Salaries, Directors fees allowances and benefits in kind Discretionary bonuses Retirement scheme contributions Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Board of directors Dr Lee Shau Kee Mr Lee Ka Shing Dr Patrick Fung Yuk Bun Mr Dominic Cheng Ka On Mr Richard Tang Yat Sun Mr Colin Lam Ko Yin Mr Eddie Lau Yum Chuen Mr Tony Ng* Mr Norman Ho Hau Chong Mr Alexander Au Siu Kee Independent non-executive directors Dr David Sin Wai Kin Mr Wu King Cheong Dr Timpson Chung Shui Ming Mr Howard Yeung Ping Leung** Mr Thomas Liang Cheung Biu** ,722 1,722 * Retired on 7 June ** Re-designated as independent non-executive director on 6 December 2012.

121 118 Notes to the Financial Statements 6 Emoluments of five highest paid individuals and senior management (a) Emoluments of five highest paid individuals No directors of the Company was included in the five individuals with the highest emoluments (2012: Nil). Details of directors emolument are disclosed in note 5. The aggregate of the emoluments in respect of the five (2012: five) individuals is as follows: HK$ 000 HK$ 000 Salaries, allowances and benefits in kind 14,396 8,679 Discretionary bonuses 1, Retirement scheme contributions ,912 9,963 The emoluments of the five (2012: five) individuals with the highest emoluments are within the following bands: Number of individuals Emolument band* HK$0 HK$1,000,000 HK$1,000,001 HK$1,500,000 HK$1,500,001 HK$2,000,000 3 HK$2,000,001 HK$2,500,000 1 HK$2,500,001 HK$3,000,000 2 HK$3,000,001 HK$3,500,000 3 HK$3,500,001 HK$4,000,000 HK$4,000,001 HK$4,500,000 HK$4,500,001 HK$5,000,

122 119 Annual Report 2013 Miramar Hotel and Investment Company, Limited 6 Emoluments of five highest paid individuals and senior management (Continued) (b) Emoluments of senior management Other than the emoluments of directors and five highest paid individuals disclosed in notes 5 and 6(a), the emoluments of the senior management whose profiles are set out in the section Biographical Details of Directors and Senior Management of the annual report (of which these financial statements form a part) fell within the following bands: Number of individuals Emolument band* HK$0 HK$1,000,000 5 HK$1,000,001 HK$1,500,000 HK$1,500,001 HK$2,000,000 3 HK$2,000,001 HK$2,500, * Including salaries, allowances and benefits in kind, discretionary bonuses and retirement scheme contributions 7 Profit attributable to shareholders of the Company The consolidated profit attributable to shareholders of the Company includes a profit of HK$66,217,000 (2012: HK$169,888,000) which has been dealt with in the financial statements of the Company.

123 120 Notes to the Financial Statements 8 Dividends (a) Dividends attributable to the year Interim dividend declared and paid of 17 Hong Kong cents per share HK$ 000 HK$ 000 (2012: 16 Hong Kong cents per share) 98,129 92,357 Final dividend proposed after the balance sheet date of 27 Hong Kong cents per share (2012: 25 Hong Kong cents per share) 155, , , ,665 The final dividend proposed after the balance sheet date has not been recognised as a liability at the balance sheet date. (b) Dividends attributable to the previous financial year, approved and paid during the year HK$ 000 HK$ 000 Final dividend in respect of the previous financial year, approved and paid during the year, of 25 Hong Kong cents per share (2012: 23 Hong Kong cents per share) 144, ,763 9 Earnings per share The calculation of basic earnings per share is based on the Group s profit attributable to shareholders of the Company of HK$1,277,889,000 (2012: HK$1,377,111,000) and 577,231,252 shares (2012: 577,231,252 shares) in issue during the year. There were no potential dilutive ordinary shares in existence during the years ended 31 December 2013 and 2012, and hence diluted earnings per share is the same as the basic earnings per share.

124 121 Annual Report 2013 Miramar Hotel and Investment Company, Limited 10 Segment reporting The Group manages its businesses by segments which are organised by business lines. In a manner consistent with the way in which information is reported internally to the Group s most senior executive management for the purposes of resource allocation and performance assessment, the Group has identified the following six reportable segments. No operating segments have been aggregated to form the following reportable segments. Property rental : The leasing of office and retail premises to generate rental income and to gain from the appreciation in properties values in the long term Property development and sales : The development, purchase and sale of commercial and residential properties Hotel and serviced apartment : The operating of hotel and serviced apartment and provision of hotel management services Food and beverage operation : The operation of restaurants Travel operation : The operation of travel agency services Apparel operation : The wholesale and retail of apparel The principal activities of the Group are property rental, property development and sales, hotel and serviced apartment, food and beverage operation, travel operation and apparel operation. Turnover represents rental income, income from sale of properties and properties under development, income from hotel and serviced apartment, food and beverage, travel and apparel operations.

125 122 Notes to the Financial Statements 10 Segment reporting (Continued) (a) Segment results Revenue and expense are allocated to the reportable segments with reference to sales generated by those segments and the expenses incurred by those segments. The measure used for reporting segment results is adjusted EBITDA i.e. adjusted earnings before interest, taxes, depreciation and amortisation. To arrive at adjusted EBITDA the Group s earnings are further adjusted for items not specifically attributed to individual segments, such as share of profits less losses of associates and share of profit of a joint venture, other non-operating items and other corporate expenses. Information regarding the Group s reportable segments as provided to the Group s most senior executive management for the purposes of resource allocation and assessment of segment performance for the years ended 31 December 2013 and 2012 is set out below Property Property development Hotel and serviced Food and beverage Travel Apparel rental and sales apartment operation operation operation Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Revenue from external customers 741,785 62, , ,017 1,220,946 82,559 3,044,459 Inter-segment revenue 2,427 5,980 8,407 Reportable segment revenue 741,785 62, , ,997 1,220,946 82,559 3,052,866 Elimination of inter-segment revenue (8,407) Consolidated turnover 3,044,459 Reportable segment results (adjusted EBITDA) 631,763 (13,222) 223,771 (21,105) 56,643 (80,284) 797,566 Unallocated corporate expenses (197,451) 600,115 Finance costs (30,487) Share of profits less losses of associates (339) Share of profit of a joint venture 703 Net gain on disposal of properties 38,783 Net gain on disposal of subsidiaries 48,241 Net gain on trading securities/ available-for-sale securities 2,257 Net increase in fair value of investment properties 799, ,810 Consolidated profit before taxation 1,459,083

126 123 Annual Report 2013 Miramar Hotel and Investment Company, Limited 10 Segment reporting (Continued) (a) Segment results (continued) 2012 Property rental Property development and sales Hotel and serviced apartment Food and beverage operation Travel operation Apparel operation Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Revenue from external customers 690, , , ,133 1,119,793 91,146 2,973,859 Inter-segment revenue 1,871 5,345 7,216 Reportable segment revenue 690, , , ,478 1,119,793 91,146 2,981,075 Elimination of inter-segment revenue (7,216) Consolidated turnover 2,973,859 Reportable segment results (adjusted EBITDA) 586,433 (20,901) 233,611 (39,561) 35,476 (35,162) 759,896 Unallocated corporate expenses (198,172) 561,724 Finance costs (30,259) Share of profits less losses of associates (670) Share of profit of a joint venture 742 Net gain on disposal of properties 41,879 Net gain on trading securities 13,068 Net increase in fair value of investment properties 929, ,079 Consolidated profit before taxation 1,515,563

127 124 Notes to the Financial Statements 10 Segment reporting (Continued) (b) Geographical information The following table sets out information about the geographical location of (i) the Group s revenue from external customers and (ii) the Group non-current assets other than financial instruments and deferred assets. The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of non-current assets is based on the physical location of the asset, in case of interests in associates and a joint venture, the location of operations. Revenue from external customers Non-current assets HK$ 000 HK$ 000 HK$ 000 HK$ 000 The Hong Kong Special Administrative Region 2,780,126 2,622,447 11,423,872 10,684,759 The People s Republic of China 201, , , ,834 The United States of America 62, ,660 3,044,459 2,973,859 12,157,879 11,389,593

128 125 Annual Report 2013 Miramar Hotel and Investment Company, Limited 11 Fixed assets (a) The Group Cost or valuation: Other fixed assets Leasehold land and buildings Investment properties Hotel held for own use * # Others Sub-total Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January ,535, ,221 7,037 1,607,765 1,755,023 12,290,181 Additions 11, , , ,769 Disposals (30,890) (30,890) (30,890) Disposal of subsidiaries (40,800) (40,800) Exchange adjustments 17,765 3,604 3,604 21,369 Surplus on revaluation 799, ,810 Reclassification (244,831) 244, ,831 At 31 December ,078, ,221 7,037 1,952,390 2,099,648 13,178,439 Representing: Cost 140,221 7,037 1,952,390 2,099,648 2,099,648 Valuation ,078,791 11,078,791 11,078, ,221 7,037 1,952,390 2,099,648 13,178,439 Accumulated depreciation: At 1 January ,810 5, , , ,382 Charge for the year 1, , , ,025 Written back on disposals (27,302) (27,302) (27,302) Exchange adjustments 1,288 1,288 1,288 At 31 December ,727 5, ,456 1,032,393 1,032,393 Net book value: At 31 December ,078,791 48,494 1,827 1,016,934 1,067,255 12,146,046 * Others mainly comprise machinery, furniture, fixtures and equipment. # Included in the balance is an amount of HK$290,000,000 (2012: HK$Nil) representing a hotel property under construction.

129 126 Notes to the Financial Statements 11 Fixed assets (Continued) (a) The Group (continued) Cost or valuation: Other fixed assets Leasehold land and buildings Investment properties Hotel held for own use *Others Sub-total Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January ,653, ,221 19,473 1,560,710 1,720,404 11,373,623 Additions 3,464 55,924 55,924 59,388 Disposals (55,054) (8,372) (9,911) (18,283) (73,337) Exchange adjustments 4,450 1,042 1,042 5,492 Surplus on revaluation 929, ,079 Reclassification (4,064) (4,064) (4,064) At 31 December ,535, ,221 7,037 1,607,765 1,755,023 12,290,181 Representing: Cost 140,221 7,037 1,607,765 1,755,023 1,755,023 Valuation ,535,158 10,535,158 10,535, ,221 7,037 1,607,765 1,755,023 12,290,181 Accumulated depreciation: At 1 January ,893 10, , , ,590 Charge for the year 1, , , ,693 Written back on disposals (3,406) (4,512) (7,918) (7,918) Exchange adjustments Reclassification (2,302) (2,302) (2,302) At 31 December ,810 5, , , ,382 Net book value: At 31 December ,535,158 50,411 1, , ,641 11,379,799 * Others mainly comprise machinery, furniture, fixtures and equipment.

130 127 Annual Report 2013 Miramar Hotel and Investment Company, Limited 11 Fixed assets (Continued) (b) The Company Other fixed assets Leasehold land and buildings Investment properties held for own use * # Others Sub-total Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Cost or valuation: At 1 January , ,908 71, ,483 Additions 46,623 46,623 46,623 Disposals (15,218) (15,218) (15,218) Surplus on revaluation 8,516 8,516 Reclassification (244,831) 244, ,831 At 31 December , , ,404 Representing: Cost , , ,404 Accumulated depreciation: At 1 January ,789 53,011 53,011 Charge for the year 3 4,383 4,386 4,386 Written back on disposals (15,205) (15,205) (15,205) At 31 December ,967 42,192 42,192 Net book value: At 31 December , , ,212 * Others comprise machinery, furniture, fixtures and equipment. # Included in the balance is an amount of HK$290,000,000 (2012: HK$Nil) representing a hotel property under construction.

131 128 Notes to the Financial Statements 11 Fixed assets (Continued) (b) The Company (continued) Other fixed assets Leasehold land and buildings Investment properties held for own use *Others Sub-total Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Cost or valuation: At 1 January , ,418 67, ,734 Additions 4,584 4,584 4,584 Disposals (1,094) (1,094) (1,094) Surplus on revaluation 26,259 26,259 At 31 December , ,908 71, ,483 Representing: Cost ,908 71,168 71,168 Valuation , , , ,908 71, ,483 Accumulated depreciation: At 1 January ,663 49,882 49,882 Charge for the year 3 4,220 4,223 4,223 Written back on disposals (1,094) (1,094) (1,094) At 31 December ,789 53,011 53,011 Net book value: At 31 December , ,119 18, ,472 * Others comprise machinery, furniture, fixtures and equipment.

132 129 Annual Report 2013 Miramar Hotel and Investment Company, Limited 11 Fixed assets (Continued) (c) Fair value measurement of investment properties (i) Fair value hierarchy The following table presents the fair value of the Group s investment properties measured at the balance sheet date on a recurring basis, categorised into the three-level fair value hierarchy as defined in HKFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows: Level 1 valuations: Fair value measured using only Level 1 inputs, i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 valuations: Fair value measured using Level 2 inputs, i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available. Level 3 valuations: Fair value measured using significant unobservable inputs. The fair values of the Group s investment properties measured using Level 3 inputs. During the year ended 31 December 2013, except for the investment property held by the Company that is under construction to be developed as a hotel property (which currently classified as other fixed assets and stated at cost less any impairment losses), there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3. The Group s policy is to recognise transfers between levels of fair value hierarchy as at the balance sheet date in which they occur. All of the Group s investment properties were revalued as at 31 December The valuations were carried out by an independent firm of surveyors, DTZ, who have among their staff Members of the Hong Kong Institute of Surveyors with recent experience in the location and category of property being valued. The Group s management has reviewed the valuation results performed by the independent surveyors for financial reporting purposes by verifying all major inputs and assumptions, and accessing the reasonableness of property valuation. Such valuation is performed at each interim and annual balance sheet date and is reviewed and approved by senior management.

133 130 Notes to the Financial Statements 11 Fixed assets (Continued) (c) Fair value measurement of investment properties (continued) (ii) Information about Level 3 fair value measurements Group Investment properties Valuation techniques Income capitalisation approach Unobservable inputs Range of capitalisation rates In Hong Kong Retail 3.0% to 6.0% Office 4.4% In the People s Republic of China ( the PRC ) Retail 8.5% Serviced apartment 6.5% The fair value of investment properties is based on income capitalisation approach which capitalised the net income of the properties under the existing tenancies and upon reversion after expiry of the current leases. The fair value measurement is negatively correlated to the capitalisation rate. The movements during the year in the balance of Level 3 fair value measurements are set out in note 11(a) to these financial statements. Fair value adjustment of investment properties is recognised in the line item net increase in fair value of investment properties on the face of the consolidated income statement. Exchange adjustments of investment properties are recognised in other comprehensive income in exchange reserve. All the gains recognised in profit or loss for the year arise from the properties held at the balance sheet date.

134 131 Annual Report 2013 Miramar Hotel and Investment Company, Limited 11 Fixed assets (Continued) (d) The analysis of cost or valuation of properties is as follows: Land and buildings in Hong Kong: The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 long leases 109, , medium term leases* 10,754,473 9,957, , ,430 short leases 2,865 Land and buildings outside Hong Kong: long leases 550,959 medium term leases 652,431 52,945 short leases ,516,049 10,682, , ,575 * Included in the balance is an amount of HK$290,000,000 (2012: HK$ Nil) representing a hotel property under construction. (e) The Group and the Company lease out investment properties under operating leases. The leases typically run for an initial period of 1 to 6 years, with an option to renew the lease after that date at which time all terms are renegotiated. Lease payments may be varied periodically to reflect market rentals and may contain a contingent rental element which is based on various percentages of tenant s sales receipts. The total contingent rents recognised in the consolidated income statement for the year are HK$19,120,000 (2012: HK$19,478,000). (f) The gross carrying amounts of investment properties of the Group and the Company held for use in operating leases are HK$11,078,791,000 (2012: HK$10,535,158,000) and HK$Nil (2012: HK$236,315,000) respectively. All properties held under operating leases that would otherwise meet the definition of investment properties are classified as investment property. (g) Total future minimum lease payments under non-cancellable operating leases are receivable as follows: The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Within 1 year 576, , After 1 year but within 5 years 592, ,860 After 5 years 20 11,339 1,168,660 1,111,

135 132 Notes to the Financial Statements 12 Interests in subsidiaries The Company HK$ 000 HK$ 000 Unlisted shares, at cost 92,797 93,332 Amounts due from subsidiaries (note (a)) 2,846,073 3,095,892 2,938,870 3,189,224 Less: Impairment loss (618,745) (410,429) 2,320,125 2,778,795 Amounts due to subsidiaries (note (b)) (2,121,580) (1,604,097) Notes: (a) (b) The amounts due from subsidiaries are unsecured, interest-free and have no fixed terms of repayment except for the amounts due from certain subsidiaries amounting to HK$1,724,763,000 (2012: HK$1,976,232,000), which are interest bearing with reference to the prevailing market rate. The amounts due to subsidiaries are unsecured, interest-free and have no fixed terms of repayment except for the amounts due to certain subsidiaries amounting to HK$785,013,000 (2012: HK$545,454,000), which are interest bearing with reference to the prevailing market rate. The following list contains only the particulars of subsidiaries which principally affected the results, assets or liabilities of the Group. All of these are subsidiaries as defined under note 1(d) and have been consolidated into the Group s financial statements. Name of company Place of incorporation Place of operation Particulars of issued and paid up capital Proportion of ownership interest Group s effective interest Held by the Company Held by a subsidiary Principal activity All Best Resources Limited Hong Kong The PRC HK$ % 100% Property rental Chitat Construction Limited Hong Kong The PRC HK$10, % 99% 1% Property rental Contender Limited Hong Kong Hong Kong HK$200, % 100% Hotel operation and property rental East Dragon Resources Limited Hong Kong The PRC HK$ % 100% Property rental

136 133 Annual Report 2013 Miramar Hotel and Investment Company, Limited 12 Interests in subsidiaries (Continued) Name of company Place of incorporation Place of operation Particulars of issued and paid up capital Proportion of ownership interest Group s effective interest Held by the Company Held by a subsidiary Principal activity Globe Century Development Limited Hong Kong Hong Kong HK$10, % 100% Property rental Glory Light Holdings Limited Hong Kong Hong Kong HK$1 100% 100% Restaurant operation Grand City Resources Limited Hong Kong The PRC HK$ % 100% Property rental How Light Investments Limited Hong Kong The PRC HK$100, % 100% Property sale Korngold Limited Hong Kong Hong Kong HK$2 100% 100% Property investment Merry King Resources Limited Hong Kong Hong Kong HK$1,000 90% 90% Restaurant operation Mira Moon Limited Hong Kong Hong Kong HK$1 100% 100% Hotel operation Miramar East Company Limited Hong Kong Hong Kong HK$10, % 100% Property rental Miramar Finance Limited Hong Kong Hong Kong HK$100, % 100% Finance Miramar Group (Corporate Funding) Co. Limited Hong Kong Hong Kong HK$1, % 99% 1% Finance Miramar Hotel and Property Management Company Limited Hong Kong Hong Kong HK$1 100% 100% Property management Miramar Hotel & Investment (Express) Limited Hong Kong Hong Kong HK$10,000, % 100% Travel agency Miramar Hotel Management Company Limited Hong Kong Hong Kong HK$10, % 100% Restaurant operation and hotel management

137 134 Notes to the Financial Statements 12 Interests in subsidiaries (Continued) Name of company Place of incorporation Place of operation Particulars of issued and paid up capital Proportion of ownership interest Group s effective interest Held by the Company Held by a subsidiary Principal activity Miramar Travel Limited Hong Kong Hong Kong HK$13,000, % 53.8% Travel agency The Pinesprop Limited Hong Kong Hong Kong HK$1, % 100% Property investment Rainbow City Development Limited Hong Kong Hong Kong HK$1 100% 100% Restaurant operation Randall Resources Limited Hong Kong The PRC HK$ % 100% Property rental Shahdan Limited Hong Kong Hong Kong HK$200, % 100% Property rental Smart Faith Investments Limited Hong Kong Hong Kong HK$1 100% 100% Restaurant operation Strong Profit Resources Limited Hong Kong The PRC HK$10,000 70% 100% Property sale Tsui Hang Village Restaurant Limited Hong Kong Hong Kong HK$500, % 100% Restaurant operation Warsaw Investments Limited Hong Kong Hong Kong HK$10, % 100% Property rental World Eagle Resources Limited Hong Kong Hong Kong HK$2 100% 100% Restaurant operation Beijing Cuisine Cuisine Restaurant Company Limited ~* The PRC The PRC US$2,100, % 100% Restaurant operation Grand Mira Property Management (Shanghai) Limited ~* The PRC The PRC US$5,000, % 100% Property rental and management

138 135 Annual Report 2013 Miramar Hotel and Investment Company, Limited 12 Interests in subsidiaries (Continued) Name of company Place of incorporation Place of operation Particulars of issued and paid up capital Proportion of ownership interest Group s effective interest Held by the Company Held by a subsidiary Principal activity Knutsford Trading (Beijing) Co. Limited ~* The PRC The PRC RMB5,000, % 100% Apparel operation Miramar Fashion (Shanghai) Co. Limited ~* The PRC The PRC RMB60,000, % 100% Apparel operation Shanghai Henderson Miramar Hotels Management Co. Ltd. ^* The PRC The PRC US$200, % 100% Hotel management Shanghai Shangmei Property Co. Ltd. ^* The PRC The PRC US$13,000, % 68.6% Property development Wuhan Cuisine Cuisine Restaurant Company Limited ~* The PRC The PRC RMB43,400, % 100% Restaurant operation Centralplot Inc. * The British Virgin The United US$38,133,285 88% 88% Property Islands States of development America * KPMG are not statutory auditors of these subsidiaries. The total net assets and total turnover of these subsidiaries constituting approximately 8% (2012: 9%) and 5% (2012: 5%) respectively of the related consolidated totals. ~ Wholly foreign-owned enterprise ^ Sino-foreign equity joint venture enterprise

139 136 Notes to the Financial Statements 13 Interests in associates The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Unlisted shares, at cost Share of net assets 6,473 6,812 Amounts due from associates 6,258 6,205 4,287 4,274 Loans to associates 36,971 36,971 49,702 49,988 4,287 4,274 Less: Impairment loss (47,886) (47,886) (4,208) (4,208) 1,816 2, Amounts due from associates and loans to associates are unsecured, interest-free and have no fixed terms of repayment. All of the Group s associates are unlisted corporate entities whose quoted market price is not available and not material (in aggregate and/or individually) to the Group. Details of the Group s principal associate are as follows: Name of associate Kamliease International Limited * Place of incorporation Place of operation Proportion of ownership interest Group s effective interest Held by the Company Held by a subsidiary Principal activity Hong Kong The PRC 49% 49% Property sale * KPMG are not statutory auditors of this associate. Aggregate information of associates that are not individually material: HK$ 000 HK$ 000 Aggregate carrying amount of individually immaterial associates in the consolidated financial statements 1,816 2,102 Aggregate amounts of the Group s share of those associates Loss from continuing operations (339) (670) Total comprehensive income (339) (670)

140 137 Annual Report 2013 Miramar Hotel and Investment Company, Limited 14 Interest in a joint venture The Group HK$ 000 HK$ 000 Share of net assets 6,726 6,023 Amount due from a joint venture 3,291 1,669 10,017 7,692 Amount due from a joint venture is unsecured, interest-free and has no fixed terms of repayment. Details of the Group s joint venture, which is an unlisted corporate entity whose quoted market price is not available and not material to the Group, are as follows: Name of joint venture Saboten Miramar Hong Kong Company Limited Form of business structure Place of incorporation and operation Particulars of issued and paid up capital Proportion of ownership interest Group s effective interest Held by the Company Held by a subsidiary Principal activity Incorporated Hong Kong HK$12,000,000 50% 50% Restaurant operation Information of a joint venture HK$ 000 HK$ 000 Carrying amount of a joint venture in the consolidated financial statements 10,017 7,692 Amounts of the Group s share of this joint venture Profit from continuing operations Total comprehensive income

141 138 Notes to the Financial Statements 15 Available-for-sale securities The Group HK$ 000 HK$ 000 Non-current Unlisted debt securities in overseas (note) 251, ,598 Listed equity securities in Hong Kong 61,865 9,636 Listed equity securities in overseas 94, , ,234 Current Investment fund, unlisted 33,940 31,977 Total 441, ,211 Market value of listed equity securities 156,355 9,636 Note: An impairment loss of HK$293,000 (2012: HK$Nil) was recognised during the year. 16 Properties under development for sale The Group HK$ 000 HK$ 000 Outside Hong Kong on freehold land 62,297 All the properties under development for sale were disposed to an independent third party during the year. 17 Inventories The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Consumable stores 16,338 19,911 3,491 5,217 Properties held for resale 118, ,992 Merchandised goods 17,389 50, , ,634 3,491 5,217 Properties held for resale of HK$118,468,000 (2012: HK$113,992,000) and merchandised goods of HK$17,389,000 (2012: HK$50,731,000) are net of a provision in order to state these properties and merchandised goods at the lower of their cost and estimated net realisable value.

142 139 Annual Report 2013 Miramar Hotel and Investment Company, Limited 18 Trade and other receivables The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade receivables 110, ,459 3,575 7,478 Less: Allowance for doubtful debts (3,942) (3,838) (10) (10) 107, ,621 3,565 7,468 Other receivables, deposits and prepayments 197, ,506 20,369 20, , ,127 23,934 27,566 At 31 December 2013, all of the trade and other receivables are expected to be recovered within one year. All of the trade and other receivables at 31 December 2012 were expected to be recovered within one year except for the amount of HK$31,044,000 which was expected to be recovered after more than one year and recovered during the year. (a) Included in trade and other receivables are trade debtors (net of allowance for doubtful debts) with the following ageing analysis, based on the invoice date (or date of revenue recognition, if earlier), as at the balance sheet date: The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ to 1 month 71,902 94,840 3,132 4,444 1 month to 2 months 15,867 12, ,414 Over 2 months 19,235 25, , , ,621 3,565 7,468 The Group s credit policy is set out in note 27(a).

143 140 Notes to the Financial Statements 18 Trade and other receivables (Continued) (b) Impairment of trade receivables Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly. The movement in the allowance for doubtful debts during the year, including both specific and collective loss components, is as follows: The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January 3,838 1, Impairment loss recognised (note 3(c)) 3,148 2,979 Uncollectible amounts written off (3,044) (558) At 31 December 3,942 3, At 31 December 2013, the Group s and the Company s trade receivables of HK$3,942,000 (2012: HK$3,838,000) and HK$10,000 (2012: HK$10,000) respectively were individually determined to be impaired. The individually impaired receivables related to customers that were in financial difficulties and management assessed that the receivables are expected to be not recoverable. Consequently, specific allowances for doubtful debts of HK$3,942,000 (2012: HK$3,838,000) and HK$10,000 (2012: HK$10,000) respectively were recognised. The Group does not hold any collateral over these balances.

144 141 Annual Report 2013 Miramar Hotel and Investment Company, Limited 18 Trade and other receivables (Continued) (c) Trade receivables that are not impaired The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired are as follows: The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Neither past due nor impaired 71,902 94,840 3,132 4,444 Less than 1 month past due 15,867 12, ,414 1 to 2 months past due 2,665 7, ,306 Over 2 months past due 16,570 18, ,102 37, , , ,621 3,565 7,468 Receivables that were neither past due nor impaired relate to a wide range of customers for whom there were no recent history of default. Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances. 19 Trading securities The Group HK$ 000 HK$ 000 Listed equity securities in Hong Kong (stated in market value) 7,238 2,828

145 142 Notes to the Financial Statements 20 Cash and bank balances Deposits with banks and other The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 financial institutions 2,153,482 1,557,965 2,101,652 1,390,212 Cash at bank and in hand 721, , ,293 6,304 2,874,785 1,992,253 2,224,945 1,396,516 Cash and bank balances at 31 December 2013 include HK$128,214,000 equivalent (2012: HK$186,577,000 equivalent) place with banks in the PRC, the remittance of which are subject to relevant rules and regulations of foreign exchange control promulgated by the PRC government. 21 Trade and other payables The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade payables 101, ,518 17,808 32,485 Other payables 379, , ,486 55,951 Amounts due to holders of non-controlling interests of subsidiaries (see note 22) 122,474 75,886 Amounts due to associates (note) 12,800 10,473 4,380 4, , , ,674 92,832 Note: Amounts due to associates are unsecured, interest-free and repayable on demand. All of the trade and other payables are expected to be settled within one year or are repayable on demand. Included in trade and other payables are trade creditors with the following ageing analysis as at the balance sheet date: The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Due within 3 months or on demand 79,482 89,443 17,390 31,987 Due after 3 months but within 6 months 21,784 20, , ,518 17,808 32,485

146 143 Annual Report 2013 Miramar Hotel and Investment Company, Limited 22 Amounts due to holders of non-controlling interests of subsidiaries Except the amounts due to holders of non-controlling interests of a subsidiary amounting to HK$Nil (2012: HK$47,438,000), which is interest bearing at nil (2012: 6.14% per annum) and not expected to be settled within one year, and the amounts due to holders of non-controlling interests of a subsidiary amounting to HK$48,408,000 (2012: HK$4,304,000), which is interest bearing at 6.40% (2012: 6.14%) per annum and repayable within one year, all of the amounts due to holders of non-controlling interests of subsidiaries are unsecured, interest-free and have no fixed terms of repayment. 23 Bank loans and overdrafts The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Unsecured bank overdrafts 4,043 9,614 8,976 Unsecured bank loans and repayable: Within one year 794, ,899 85, ,860 Between one and two years 848, ,984 Between two and five years 843, , ,156 1,691,652 1,041, ,156 Total unsecured bank loans 2,485,736 1,997, , ,860 2,489,779 2,006, , ,836 Interest on bank loans and overdrafts is charged at prevailing market rates. Bank loans repayable within one year will be settled by re-financing or from the general working capital of the Group. All of the Group s banking facilities are subject to the fulfilment of covenants relating to certain of the Group s balance sheet ratios, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants, the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group s management of liquidity risk are set out in note 27(b). As at 31 December 2013 none of the covenants relating to drawn down facilities had been breached (2012: None).

147 144 Notes to the Financial Statements 24 Deferred liabilities Deferred liabilities represent refundable rental deposits received on properties held under operating leases with unexpired lease terms exceeding one year as at the balance sheet date. 25 Taxation in the balance sheet (a) Tax payable/(recoverable) in the balance sheet represents: The Group HK$ 000 HK$ 000 Provision for Hong Kong Profits Tax for the year 108,804 71,154 Provisional Hong Kong Profits Tax paid (72,542) (44,328) 36,262 26,826 Balance of Hong Kong Profits Tax payable/(recoverable) relating to prior years 303 (518) Overseas tax recoverable (19,308) (13,066) Representing: 17,257 13,242 Tax recoverable (22,155) (15,924) Tax payable 39,412 29,166 17,257 13,242 None of the tax payable/(recoverable) is expected to be settled or recovered after more than one year.

148 145 Annual Report 2013 Miramar Hotel and Investment Company, Limited 25 Taxation in the balance sheet (Continued) (b) Deferred tax assets and liabilities recognised: (i) The Group The components of deferred tax liabilities/(assets) recognised in the consolidated balance sheet and the movements during the year are as follows: Deferred tax arising from: Depreciation allowances in excess of related depreciation Revaluation of properties Future benefit of tax loss Others Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January ,037 54,319 (41,092) (22,276) 154,988 Charged/(credited) to profit or loss 7, ,364 (7,092) 28,946 Exchange adjustments At 31 December ,837 54,739 (12,728) (29,304) 184,544 At 1 January ,837 54,739 (12,728) (29,304) 184,544 (Credited)/charged to profit or loss (1,175) 5,345 9,526 29,304 43,000 Disposal of a subsidiary (125) (125) Exchange adjustments 583 1,825 2,408 At 31 December ,120 61,909 (3,202) 229,827 (ii) The Company The components of deferred tax liabilities recognised in the balance sheet and the movements during the year are as follows: Depreciation allowances in excess of related depreciation HK$ 000 Deferred tax arising from: At 1 January ,448 Charged to profit or loss 675 At 31 December ,123

149 146 Notes to the Financial Statements 25 Taxation in the balance sheet (Continued) (b) Deferred tax assets and liabilities recognised: (continued) (ii) The Company (continued) Deferred tax arising from: Depreciation allowances in excess of related depreciation HK$ 000 At 1 January ,123 Charged to profit or loss (8,123) At 31 December 2013 (iii) Net deferred tax assets The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 recognised on the balance sheet (2,774) (33,608) Net deferred tax liabilities recognised on the balance sheet 232, ,152 8, , ,544 8,123 (c) Deferred tax assets not recognised The Group and the Company have not recognised deferred tax assets of HK$97,454,000 (2012: HK$73,413,000) and HK$16,891,000 (2012: HK$6,100,000) in respect of accumulated tax losses of HK$460,424,000 (2012: HK$297,538,000) and HK$102,369,000 (2012: HK$36,971,000) respectively as the availability of future taxable profits against which the assets can be utilised is uncertain at 31 December The tax losses can be carried forward to offset against the taxable profits of subsequent years for up to five years from the year in which they were incurred or there is no restriction on their expiry, depending on the tax jurisdiction concerned.

150 147 Annual Report 2013 Miramar Hotel and Investment Company, Limited 26 Total equity (a) Movements in components of equity The reconciliation between the opening and closing balances of each component of the Group s consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in the Company s individual components of equity between the beginning and the end of the year are set out below: The Company Share capital Share premium Capital reserve General reserve Retained profits Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Balance at 1 January , ,628 1,019, , ,913 2,522,477 Changes in equity for 2012: Profit and total comprehensive income for the year 169, ,888 Final dividends approved in respect of the previous year (note 8(b)) (132,763) (132,763) Interim dividends declared in respect of the current year (note 8(a)) (92,357) (92,357) Balance at 31 December , ,628 1,019, , ,681 2,467,245 Balance at 1 January , ,628 1,019, , ,681 2,467,245 Changes in equity for 2013: Profit and total comprehensive income for the year 66,217 66,217 Final dividends approved in respect of the previous year (note 8(b)) (144,308) (144,308) Interim dividends declared in respect of the current year (note 8(a)) (98,129) (98,129) Balance at 31 December , ,628 1,019, , ,461 2,291,025

151 148 Notes to the Financial Statements 26 Total equity (Continued) (b) Share capital Authorised: No. of shares Amount No. of shares Amount HK$ 000 HK$ 000 Ordinary shares of HK$0.70 each 700,000, , ,000, ,000 Issued and fully paid: Ordinary shares of HK$0.70 each 577,231, , ,231, ,062 (c) Nature and purpose of reserves (i) The Group The application of the share premium account is governed by section 48B of the Hong Kong Companies Ordinance. The capital reserve represents positive goodwill arose from acquisition of subsidiaries and associates prior to 1 January 2001 which was taken directly to equity on acquisition. The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policy set out in note 1(u). The application of the general reserve is in accordance with Article 117 of the Company s Articles of Association. The investment revaluation reserve comprises the cumulative net change in fair value of available-forsale securities held at balance sheet date and is dealt with in accordance with the accounting policy in note 1(g). The accumulated losses attributable to associates at 31 December 2013 were HK$1,663,000 (2012: HK$1,324,000).

152 149 Annual Report 2013 Miramar Hotel and Investment Company, Limited 26 Total equity (Continued) (c) Nature and purpose of reserves (continued) (ii) The Company The application of the share premium account is governed by section 48B of the Hong Kong Companies Ordinance. The application of the capital reserve and the general reserve is in accordance with Article 117 of the Company s Articles of Association. Distributable reserves of the Company at 31 December 2013, calculated in accordance with section 79B of the Hong Kong Companies Ordinance, amounted to HK$413,767,000 (2012: HK$598,503,000). After the balance sheet date, the directors proposed a final dividend of 27 Hong Kong cents per share (2012: 25 Hong Kong cents per share) amounting to HK$155,852,000 (2012: HK$144,308,000). This dividend has not been recognised as a liability at the balance sheet date. (d) Capital management The Group s primary objectives when managing capital are to safeguard the Group s ability to continue as a going concern, to meet its financial obligations and continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost. The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in the Group s business portfolio and economic conditions. The Group monitors its capital structure by reviewing its net debt-to-equity ratios and cash flow requirements, taking into account of its future financial obligations and commitments. For this purpose, the Group defines net debt as total interest-bearing borrowings, including interest-bearing amounts due to holders of non-controlling interests of subsidiaries, less cash and bank balances. Shareholders equity comprises issued share capital and reserves attributable to equity shareholders of the Company. Total equity comprises shareholders equity and non-controlling interests.

153 150 Notes to the Financial Statements 26 Total equity (Continued) (d) Capital management (continued) The net debt-to-equity ratios at balance sheet date are as follows: The Group Note HK$ 000 HK$ 000 Bank loans and overdrafts 23 2,489,779 2,006,695 Interest-bearing amounts due to holders of non-controlling interests of a subsidiary 22 48,408 51,742 Less: Cash and bank balances 20 (2,874,785) (1,992,253) Net debts (336,598) 66,184 Shareholders equity 12,135,753 11,072,646 Net debt-to-shareholders equity ratio N/A 0.6% Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirement. 27 Financial risk management and fair values Exposure to credit, liquidity, interest rate and foreign currency risks arises in the normal course of the Group s business. The Group is also exposed to equity price risk arising from its equity investments in other entities. The Group s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.

154 151 Annual Report 2013 Miramar Hotel and Investment Company, Limited 27 Financial risk management and fair values (Continued) (a) Credit risk The Group s credit risk is primarily attributable to trade and other receivables and cash and bank balances. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. In respect of trade and other receivable, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Trade receivables are due ranging from 7 to 60 days from the date of billing. Debtors with balances that are more than 60 days overdue are generally required to settle all outstanding balances before any further credit is granted. Normally, the Group does not obtain any collateral from customers. The ageing of trade receivables at 31 December 2013 is summarised in note 18. Cash is deposited with financial institutions with sound credit ratings to minimise credit exposure. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet after deducting any impairment allowance. There is no significant concentration of credit risk within the Group. (b) Liquidity risk Cash management of the Company and wholly-owned subsidiaries of the Group are substantially centralised at the Group level. The Group s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

155 152 Notes to the Financial Statements 27 Financial risk management and fair values (Continued) (b) Liquidity risk (continued) The following tables detail the remaining contractual maturities at the balance sheet date of the Group s and the Company s financial liabilities, which are based on contractual undiscounted cash flows and the earliest date the Group and the Company can be required to pay: The Group At 31 December 2013 Within 1 year or on demand Contractual undiscounted cash flow More than 1 year but less than 2 years More than 2 years but less than 5 years Total Carrying amount HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade and other payables 481, , ,146 Amounts due to associates 12,800 12,800 12,800 Amounts due to holders of non-controlling interests of subsidiaries 125, , ,474 Bank loans and overdrafts 826, , ,832 2,543,773 2,489,779 Sales and rental deposits received 185, , ,888 Deferred liabilities 36,020 90, , ,789 1,632, , ,601 3,475,968 3,418,876 At 31 December 2012 Trade and other payables 434, , ,302 Amounts due to associates 10,473 10,473 10,473 Amounts due to holders of non-controlling interests of subsidiaries 75,886 47, , ,324 Bank loans and overdrafts 1,158, , ,800 2,045,806 2,006,695 Sales and rental deposits received 161, , ,638 Deferred liabilities 61,416 55, , ,239 1,840, , ,623 2,892,782 2,853,671

156 153 Annual Report 2013 Miramar Hotel and Investment Company, Limited 27 Financial risk management and fair values (Continued) (b) Liquidity risk (continued) The Company At 31 December 2013 Within 1 year or on demand Contractual undiscounted cash flow More than 1 year but less than 2 years More than 2 years but less than 5 years Total Carrying amount HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade and other payables 127, , ,294 Amount due to an associate 4,380 4,380 4,380 Deposits received Bank loans and overdrafts 89,011 3, , , , ,036 3, , , ,181 Financial guarantees issued: Maximum amount guaranteed (note 30) 2,164,000 2,164,000 At 31 December 2012 Trade and other payables 88,436 88,436 88,436 Amount due to an associate 4,396 4,396 4,396 Deposits received 1,499 1,499 1,499 Bank loans and overdrafts 290, , , , , ,167 Financial guarantees issued: Maximum amount guaranteed (note 30) 1,648,000 1,648,000

157 154 Notes to the Financial Statements 27 Financial risk management and fair values (Continued) (c) Interest rate risk The Group s exposure to interest rate risk relates principally to the Group s bank loans and amounts due to holders of non-controlling interests of subsidiaries. The Group is most vulnerable to changes in Hong Kong dollar interest rates. Interest rate risk is managed by the Group s senior management in accordance with defined policies through regular review to determine the strategy as to having the funding in floating/ fixed rate mix appropriate to its current business portfolio. (i) The following table details the interest rate profile of the Group s borrowings at the balance sheet date: Effective interest rate The Group The Company Amount Effective interest rate Amount Effective interest rate Amount Effective interest rate Amount HK$ 000 HK$ 000 HK$ 000 HK$ 000 Floating rate borrowings Bank loans 0.96% 2,485, % 1,997, % 333, % 279, % 1.74% 1.21% 1.20% Amounts due to holders of noncontrolling interests of a subsidiary 6.40% 48, % 47,438 Total borrowings 2,534,144 2,044, , ,860 (ii) Sensitivity analysis At 31 December 2013, it is estimated that a general increase/decrease of 25 basis points (2012: 25 basis points) in interest rates, with all other variables held constant, would have decreased/increased the Group s and the Company s profit after tax and total equity by approximately HK$5,280,000 (2012: HK$4,258,000) and HK$696,000 (2012: HK$585,000) respectively. The sensitivity analysis above indicates the instantaneous change in the Group s and the Company s profit after tax (and retained profits) that would arise assuming that the change in interest rates had occurred at the balance sheet date and had been applied to re-measure the amount of interestbearing borrowings held by the Group and the Company which expose the Group and the Company to interest rate risk at the balance sheet date. The analysis is performed on the same basis for the year ended 31 December 2012.

158 155 Annual Report 2013 Miramar Hotel and Investment Company, Limited 27 Financial risk management and fair values (Continued) (d) Equity price risk The Group is exposed to equity price changes arising from equity investments classified as trading securities (see note 19) and available-for-sale securities (see note 15). The Group s listed investments are listed in Hong Kong and overseas. Decisions to buy or sell trading securities are based on daily monitoring of the performance of individual securities compared to that of the Index and other industry indications, as well as the Group s liquidity needs. Listed investments held in the available-for-sale portfolio have been chosen taking reference to their long term growth potential and returns and are monitored regularly for performance. Given that the volatility of the stock markets may not have a direct correlation with the Group s investment portfolio, it is impractical to determine the impact that the changes in stock market indices would have on the Group s portfolio of equity investments. At 31 December 2013, it is estimated that an increase/decrease of 5% (2012: 5%) in the market value of the Group s listed available-for-sale securities, with all other variables held constant, would not affect the Group s profit unless there are impairments, the Group s total equity would have increased/decreased by HK$7,818,000 (2012: HK$482,000). For the trading securities, it is estimated that an increase/decrease of 5% (2012: 5%) in the market value, with all other variables held constant, would have increased/ decreased the Group s profit after tax and total equity by HK$302,000 (2012: HK$118,000). The sensitivity analysis above indicates the instantaneous change in the Group s profit after tax (and retained profits) and other components of consolidated equity that would arise assuming that the change in market value had occurred at the balance sheet date and had been applied to re-measure those financial instruments held by the Group which expose the Group to equity price risk at the balance sheet date. It is also assumed that the fair values of the Group s equity investments would change in accordance with the market values, that none of the Group s available-for-sale investments would be considered impaired as a result of the decrease in market values, and that all other variables remain constant. The analysis is performed on the same basis for (e) Foreign currency risk The Group owns assets and conducts its business primarily in Hong Kong with its cash flows substantially denominated in Hong Kong dollars. The Group s primary foreign currency exposures arise from its investment in subsidiaries and associates operating in the PRC and the United States of America. Where appropriate and cost-efficient, the Group seeks to finance these investments by Renminbi ( RMB ) or United States Dollars ( USD ) borrowings with reference to the future RMB or USD funding requirements from the investment and related returns.

159 156 Notes to the Financial Statements 27 Financial risk management and fair values (Continued) (e) Foreign currency risk (continued) The Group and the Company are also exposed to foreign currency risk through cash and bank balances and equity and debt investments that are denominated in a foreign currencies other than the functional currency of the operations to which the transactions relate. The currencies giving rise to this risk are primarily RMB, USD, Singapore Dollars ( SGD ), Euro ( EUR ), Japanese Yen ( JPY ) and British Pound ( GBP ). The following tables details the Group s and the Company s exposure at the balance sheet date to currency risk arising from recognised assets and liabilities denominated in a currency other than the functional currency of the entity to which they relate. For presentation purposes, the amounts of the exposure are shown in Hong Kong dollars, translated using the spot rate at the year end date. The Group Exposure to foreign currencies RMB USD SGD EUR JPY GBP RMB USD HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Cash and cash equivalents 339,368 6, , , ,569 Unlisted debt securities in overseas 251, ,597 Listed equity securities in overseas 47,351 11,086 24,307 1,649 10,097 Total 339, ,893 11,146 40,728 1,936 12, , ,597 The Company Exposure to foreign currencies RMB RMB HK$ 000 HK$ 000 Cash and cash equivalents 339, ,494

160 157 Annual Report 2013 Miramar Hotel and Investment Company, Limited 27 Financial risk management and fair values (Continued) (e) Foreign currency risk (continued) The following table indicates the instantaneous change in the Group s and the Company s profits after tax and total equity that would arise if foreign exchange rates to which the Group and the Company have significant exposure at the balance sheet date had changed at that date, assuming all other risk variables remained constant. In this respect, it is assumed that the pegged rate between the Hong Kong Dollars and United States Dollars would not be materially affected by any changes in movement in value of United States Dollars against other currencies. The Group Increase/ (decrease) in foreign exchange rates Effect on profit after tax Effects on total equity Increase/ (decrease) in foreign exchange rates Effect on profit after tax Effects on total equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 RMB 5% 16,968 16,968 5% 15,979 15,979 USD 5% SGD 5% EUR 5% 821 2,036 JPY 5% GBP 5% The Company Increase/ (decrease) in foreign exchange rates Effect on profit after tax Effects on total equity Increase/ (decrease) in foreign exchange rates Effect on profit after tax Effects on total equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 RMB 5% 16,964 16,964 5% 15,975 15,975 Results of the analysis represent an aggregation of the instantaneous effects on each of the Group entities profit after tax and equity measured in the respective functional currencies, translated into Hong Kong dollars at the exchange rate ruling at the balance sheet date for presentation purposes. The sensitivity analysis assumes that the change in foreign exchange rates had been applied to remeasure those financial instruments held by the Group and the Company which expose the Group and the Company to foreign currency risk at the balance sheet date, including inter-company payables and receivables within the Group and the Company which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis is performed on the same basis for 2012.

161 158 Notes to the Financial Statements 27 Financial risk management and fair values (Continued) (f) Fair value measurement (i) Financial assets carried at fair value The following table presents the fair value of financial instruments measured at fair value at the balance sheet date across the three-level fair value hierarchy as defined in HKFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows: Level 1 valuations: Fair value measured using only Level 1 inputs, i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 valuations: Fair value measured using Level 2 inputs, i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available. Level 3 valuations: Fair value measured using significant unobservable inputs. The Group Fair value at 31 December Fair value measurements as at 31 December Level 1 Level 2 Level 3 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Recurring fair value measurements Assets: Available-for-sale securities: Listed equity securities in Hong Kong 61,865 61,865 Listed equity securities in overseas 94,490 94,490 Unlisted debt securities in overseas 251, ,174 Unlisted investment fund 33,940 33,940 Trading securities: Listed securities in Hong Kong 7,238 7,238 Fair value at 31 December Fair value measurements as at 31 December Level 1 Level 2 Level 3 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Recurring fair value measurements Assets: Available-for-sale securities: Listed equity securities in Hong Kong 9,636 9,636 Unlisted debt securities in overseas 240, ,598 Unlisted investment fund 31,977 31,977 Trading securities: Listed securities in Hong Kong 2,828 2,828

162 159 Annual Report 2013 Miramar Hotel and Investment Company, Limited 27 Financial risk management and fair values (Continued) (f) Fair value measurement (continued) (i) Financial assets carried at fair value (continued) During the years ended 31 December 2012 and 2013, there were no transfers between instruments in Level 1 and Level 2, or transfers into or out of Level 3. The Group s policy is to recognise transfers between levels of fair value hierarchy as at the balance sheet date in which they occur. Valuation techniques and inputs used in Level 2 fair value measurements The fair value of unlisted debt securities in overseas in Level 2 is determined by a present value technique that takes into account the future cash flows that a market participant would expect to receive from holding the liability or debt instrument as an asset. The fair value of unlisted investment fund is represented by the reported net asset value. (ii) Fair values of financial assets and liabilities carried at other than fair value The fair values of receivables, bank balances and other current assets, payables and accruals and current borrowings are assumed to approximate their carrying amounts due to the short-term maturities of these assets and liabilities. All financial instruments are carried at amounts not materially different from their fair values as at 31 December 2013 and Amounts due from/(to) subsidiaries, associates, joint venture and holders of non-controlling interests of subsidiaries have no fixed repayment terms. Given these terms it is not meaningful to disclose fair values. 28 Capital commitments Capital commitments outstanding at 31 December 2013 not provided for in the financial statements were as follows: The Group HK$ 000 HK$ 000 Future expenditure relating to properties: Contracted for 173,743 23,468 Authorised but not contracted for 124, , , ,833

163 160 Notes to the Financial Statements 29 Operating lease commitments At 31 December 2013, the total future minimum lease payments under non-cancellable operating leases are payable as follows: The Group The Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Within 1 year 72,702 55,466 6,323 5,852 After 1 year but within 5 years 152,373 58,055 2,926 9,249 After 5 years 85, , ,521 9,249 15,101 The Group leases a number of properties under operating leases. The leases typically run for an initial period of 1 to 11 years, with an option to renew the lease when all terms are renegotiated. Lease payments are usually increased annually to reflect market rentals. 30 Contingent liabilities The Company has given guarantees in respect of banking facilities of certain wholly owned subsidiaries to the extent of HK$2,327,000,000 (2012: HK$2,057,000,000). The banking facilities were utilised to the extent of HK$2,164,000,000 (2012: HK$1,648,000,000) at 31 December As at balance sheet date, the directors do not consider it probable that a claim will be made against the Company under any of the guarantees. The Company has not recognised any deferred income in respect of these guarantees as their fair values cannot be reliably measured using observable market data and no transaction price was incurred.

164 161 Annual Report 2013 Miramar Hotel and Investment Company, Limited 31 Material related party transactions In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group entered into the following material related party transactions under the ordinary course of business and were carried out on normal commercial terms: HK$ 000 HK$ 000 Property agency fee payable to a subsidiary of the Group s major shareholder (note (a)) 2,900 2,495 Travel and ticketing income from subsidiaries and associates of the Group s major shareholder (note (a)) (15,481) (16,766) Management fee income from affiliated companies of the Group s major shareholder (note (b)) (1,775) (2,232) Hotel and catering service income from subsidiaries of the Group s major shareholder (note (c)) (5,209) Security service fee payable to a subsidiary of the Group s major shareholder (note (d)) 579 Rental and building management fee income from: a subsidiary of the Group s major shareholder for the leasing of Shop 2004, Miramar Shopping Centre* (3,208) (3,169) an associate of the Group s major shareholder for leasing of Office Units , and , Miramar Tower* (note (e)) (15,294) (11,669) a subsidiary of the Group s major shareholder for leasing of Shop 503A-C and , Miramar Shopping Centre and Office Units , Miramar Tower* (note (f)) (19,078) (19,925) a subsidiary of the Group s major shareholder for leasing of Shop 3013, Portion of Podium Roof and Fan Room, Miramar Shopping Centre* (note (g)) (11,463) (9,946) Rental and building management fee payable to: an associate of the Group s major shareholder for the leasing of Shop Nos and certain floor space of ifc Mall (including contingent rental of HK$Nil for the year ended 31 December 2013 (2012: HK$185,000))* 14,505 13,863 a subsidiary of the Group s major shareholder for the leasing of Units Nos , West Tower, Beijing World Financial Centre, Beijing, the PRC* 7,223 6,306 a subsidiary of the Group s major shareholder for the leasing of a building located at No. 388 Jaffe Road, Wanchai, Hong Kong (including contingent rental of HK$95,000 for the year ended 31 December 2013 (2012: HK$Nil))* (note (h)) 1,855 Net gain on disposal of subsidiaries to a subsidiary of the Group s major shareholder (note 32) (48,241) Remuneration for the directors and the senior management personnel of the Group (note (i)) 25,372 14,229 * These transactions also constitute continuing connected transactions as defined under the Listing Rules.

165 162 Notes to the Financial Statements 31 Material related party transactions (Continued) Notes: (a) The property agency fee payable to a subsidiary of the Group s major shareholder for the provision of property agency services to the Group s investment properties in Hong Kong, was calculated at a certain percentage of the gross rental income from the Group s investment properties during the year. The Group s travel division provides agency services to certain subsidiaries and associates of its major shareholder in respect of air ticket booking, hotel accommodation and hire car services under similar terms it provides to other customers. The amounts due to these companies at the year end amounted to HK$2,045,000 (2012: HK$1,030,000). (b) (c) (d) (e) (f) (g) (h) (i) The management fee income from affiliated companies of the Group s major shareholder for the provision of management services to a serviced apartment, was calculated at a certain percentage of revenue generated from that serviced apartment for the year the service provided. The net amounts due from these companies at the year end amounted to HK$6,740,000 (2012: HK$15,334,000). The Group s hotel division provides hotel and catering services to certain subsidiaries of the Group s major shareholder in respect of hotel and outside catering services and food and beverage services under similar terms it provides to other customers. The amount due from these companies at the year end amounted to HK$1,915,000 (2012: HK$Nil). The security service fee payable to a subsidiary of the Group s major shareholder for provision of security services to the Group s hotel, under similar terms it provides to other customers. The amount due to this company at the year end amounted to HK$150,000 (2012: HK$Nil). The amount due from this company at the year end amounted to HK$Nil (2012: HK$33,000). The amount due from this company at the year end amounted to HK$11,000 (2012: HK$81,000). The amount due from this company at the year end amounted to HK$333,000 (2012: HK$6,000). The amount due to this company at the year end amounted to HK$1,943,000 (2012: HK$Nil). The remuneration of directors and senior management is determined by the Remuneration Committee having regard to the performance and responsibilities of individuals and market trends.

166 163 Annual Report 2013 Miramar Hotel and Investment Company, Limited 32 Disposal of subsidiaries On 23 December 2013, the Group entered into an agreement with a subsidiary of the Group s major shareholder to dispose the entire issued share capital of Prosperwell Properties Limited ( Prosperwell ) (wholly-owned subsidiary), shareholder s loan due from Prosperwell and 94.4% issued share capital of Gourmet Enterprises Limited ( Gourmet ) (94.4% owned subsidiary), at the net consideration of HK$91,853,000. The transaction was completed on 23 December 2013 and also constitutes connected transaction as defined under the Listing Rules. The disposals of Prosperwell and Gourmet had the following effect on the Group s financial statements: HK$ 000 Investment properties (40,800) Trade and other receivables (96) Amount due from the Company (5,273) Trade and other payables 287 Rental deposit received 372 Tax payable 4 Shareholder s loan due to the Company 1,860 Deferred tax liabilities 125 Non-controlling interests 1,769 Shareholder s loan from Prosperwell (1,860) Net assets disposed (43,612) Net consideration received and net cash inflow 91,853 Net gain on disposal of subsidiaries 48, Post balance sheet events After the balance sheet date the directors proposed a final dividend. Further details are disclosed in note Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 December 2013 Up to the date of issue of these financial statements, the HKICPA has issued a few amendments and a new standard which are not yet effective for the year ended 31 December 2013 and which have not been adopted in these financial statements. The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidation financial statements.

167 164 Group s Five-year Financial Summary For the year ended 31 December 2013 For the year ended 31 December 2012 For the year ended 31 December 2011 For the year ended 31 December 2010 For the nine months ended 31 December 2009 HK$ million HK$ million HK$ million HK$ million HK$ million (note) (Restated) Results Turnover 3,044 2,974 2,496 2,112 1,303 Profit attributable to shareholders 1,278 1,377 1, Assets and liabilities Fixed assets 12,146 11,380 10,585 9,445 8,923 Interest in associates Interest in a joint venture Available-for-sale securities non-current Deferred tax assets Net current assets 1, , Total assets less current liabilities 14,323 12,624 11,794 9,804 8,960 Bank loans non-current (1,692) (1,041) (1,423) (647) (542) Deferred liabilities (127) (117) (125) (87) (95) Amounts due to holders of non-controlling interests of a subsidiary (47) (56) (54) Deferred tax liabilities (232) (218) (178) (151) (135) Net assets 12,272 11,201 10,012 8,865 8,188 Capital and reserves Share capital Reserves 11,732 10,668 9,503 8,357 7,698 Total equity attributable to shareholders of the Company 12,136 11,072 9,907 8,761 8,102 Non-controlling interests Total equity 12,272 11,201 10,012 8,865 8,188 HK$ HK$ HK$ HK$ HK$ Per share Earnings Dividends attributable to the year/ period Net asset value attributable to shareholders of the Company Note: As a result of early adoption of the amendments to HKAS 12, Income taxes in 2010, figures for the nine months ended 31 December 2009 have been adjusted to reflect the decrease in accrual of deferred tax liabilities related to certain investment properties of the Group carried at fair value.

168 165 Annual Report 2013 Miramar Hotel and Investment Company, Limited Group Properties at 31 December 2013 Major properties held for investment and/or own use Location Lot number Use Lease Group s interest (%) In Hong Kong The Mira Hong Kong Nathan Road Tsimshatsui, Kowloon Sections A and C of KIL6022 Hotel and Commercial Medium 100 Miramar Tower and Miramar Shopping Centre 1 Kimberley Road Tsimshatsui, Kowloon Portion of KIL6454 Commercial Medium Knutsford Terrace Tsimshatsui, Kowloon Portion of KIL7415 Hotel and Commercial Medium 100 1/F., Champagne Court 16 Kimberley Road Tsimshatsui, Kowloon Portion of KIL6022B Commercial Medium 100 A3, 13/F., United Mansion Nos. 37E-37H and 37J-37K Jordan Road and Nos Shanghai Street, Kowloon Portion of KIL6727 Residential Medium 100 Apartment A, 1st level Beach Chalet No. 5 Sea Ranch Lantau Island, New Territories Portion of 178DD337 Residential Medium 100 3/F., 47 and 49 Sa Po Road Kowloon City, Kowloon Portion of NKIL498 B&C Residential Medium Car Parking Spaces on G/F Chi Lan Yuen 173 Argyle Street, Kowloon Portion of KIL4194 Car parking Long 100 Basement, South China Building, No.1 Wyndham Street Hong Kong Portion of Sections K and L of IL80 Commercial Long 100 No. 88 Stanley Main Street, Hong Kong Stanley Inland Lot No.105 and Stanley Lot No.1130 Commercial Medium 100

169 166 Location Lot number Use Lease Group s interest (%) Outside Hong Kong Flat A, 1/F., Block 2 Crystal Garden Shekou Special Industrial Zone Shenzhen The People s Republic of China Portion of 102 in Shekou Special Industrial Zone Residential Medium 100 Level 4 of Miramar Shopping Arcade in Guang Fat Gardens 496 Huan Shi Dong Lu Guangzhou Guangdong Province The People s Republic of China Commercial Medium 100 Flat Nos. 403 and 503, Block 1, Jinghua Apartment 24 Jian Quo Men Wai Avenue Chao Yang District, Beijing The People s Republic of China Residential Medium Flats and 31 Car Parking Spaces in Shang-Mira Garden Hongqiao Road Shanghai The People s Republic of China Residential and Car parking Medium 100 Level 1, portion of Level 2, Portion of Level 3 and Basement Level of the Commercial Podium of Shang-Mira Garden Hongqiao Road Shanghai The People s Republic of China Commercial Medium 51.4

170 167 Annual Report 2013 Miramar Hotel and Investment Company, Limited NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Annual General Meeting (the Meeting ) of the Company will be held at The Ballroom, 18/F, The Mira Hong Kong, Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong on Wednesday, 11 June 2014 at 12:00 noon to transact the following business: 1. To receive and consider the Audited Financial Statements and the Reports of the Directors and Auditors of the Company and its subsidiaries for the year ended 31 December To declare a Final Dividend. 3. To re-elect Directors. 4. To re-appoint Auditors and authorise the Directors to fix their remuneration. 5. To consider as special business and, if thought fit, pass the following resolutions as Ordinary Resolutions: Ordinary Resolutions (A) THAT: (a) a general mandate be and is hereby generally and unconditionally given to the Directors to exercise during the Relevant Period (as defined in paragraph (b) of this Resolution) all the powers of the Company to allot, issue and deal with additional shares of the Company and to make or grant offers, agreements or options (including warrants, bonds, debentures, notes and other securities convertible into shares in the Company) which would or might require the exercise of such powers either during or after the Relevant Period, provided that the total number of shares of the Company to be allotted, issued and dealt with pursuant to the general mandate herein, otherwise than pursuant to (i) a Rights Issue (as hereinafter defined), or (ii) any option scheme or similar arrangement for the time being adopted for the grant or issue to the employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, or (iii) an issue of shares in the Company upon the exercise of the subscription or conversion rights attaching to any warrants or convertible notes which may be issued by the Company or any of its subsidiaries, or (iv) any scrip dividend pursuant to the Articles of Association of the Company from time to time, shall not exceed 20 per cent of the total number of shares of the Company in issue as at the date of this Resolution (subject to adjustment in the case of any conversion of any or all of the shares of the Company into a larger or smaller number of shares during the Relevant Period) and the said approval shall be limited accordingly; (b) for the purposes of this Resolution: Relevant Period means the period from the date of passing of this Resolution until whichever is the earliest of: (i) the conclusion of the next Annual General Meeting of the Company; (ii) the expiry of the period within which the next Annual General Meeting of the Company is required by the Articles of Association of the Company or the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) to be held; and

171 168 (iii) the date on which the approval set out in this Resolution is revoked or varied by an ordinary resolution of the Shareholders in general meeting. Rights Issue means an offer of shares in the capital of the Company open for a period fixed by the Directors of the Company to holders of shares of the Company whose names appear on the Register of Members of the Company on a fixed record date in proportion to their then holdings of such shares as at that date (subject to such exclusions or other arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong). (B) THAT: (a) subject to paragraph (b) of this Resolution, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to buy back shares of the Company on The Stock Exchange of Hong Kong Limited ( Stock Exchange ) or on any other stock exchange on which the securities of the Company may be listed and recognised by the Stock Exchange and the Securities and Futures Commission for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time be and is hereby generally and unconditionally approved; (b) the total number of shares of the Company to be bought back pursuant to the approval in paragraph (a) above shall not exceed 10 per cent of the total number of shares of the Company in issue as at the date of this Resolution (subject to adjustment in the case of any conversion of any or all of the shares of the Company into a larger or smaller number of shares during the Relevant Period) and the said approval shall be limited accordingly; and (c) for the purposes of this Resolution: Relevant Period shall have the same meaning as assigned to it under Ordinary Resolution 5(A) as set out in the notice convening this Meeting. (C) THAT: the general mandate granted to the Directors and for the time being in force to exercise the powers of the Company to allot, issue and deal with additional shares of the Company pursuant to Ordinary Resolution 5(A) as set out in the notice convening this Meeting be and is hereby extended by the addition to the total number of shares which may be allotted, issued and dealt with or agreed conditionally or unconditionally to be allotted, issued and dealt with by the Directors pursuant to such general mandate such number of shares of the Company bought back by the Company since the granting of the said general mandate pursuant to the exercise by the Directors of the powers of the Company to buy back such shares under the authority granted pursuant to Ordinary Resolution 5(B) as set out in the notice convening this Meeting provided that such number of additional shares shall not exceed 10 per cent of the total number of shares of the Company in issue as at the date of this Resolution (subject to adjustment in the case of any conversion of any or all of the shares of the Company into a larger or smaller number of shares during the Relevant Period).

172 169 Annual Report 2013 Miramar Hotel and Investment Company, Limited 6. As special business, to consider, and if through fit, pass with or without amendments, the following resolution as Special Resolution: Special Resolution THAT a new set of Articles of Association of the Company (the New Articles ), a copy of which has been produced to the Meeting marked A and signed by the Chairman of the Meeting for identification purpose, which, among other things, does not include any objects clauses, be and is hereby approved and adopted in substitution for and to the exclusion of the existing articles of association of the Company with immediate effect after the passing of this Special Resolution and that the directors of the Company be and are hereby authorised to do all things necessary to implement the adoption of the New Articles. By Order of the Board CHU KWOK SUN Corporate Secretary Hong Kong, 28 April 2014 Registered Office: 15/F, Miramar Tower 132 Nathan Road Tsim Sha Tsui Kowloon Hong Kong Notes: (1) A member of the Company (the Member ) entitled to attend and vote is entitled to appoint (i) another person (whether a Member or not) as a proxy to exercise all or any of the Member s rights to attend and to speak and vote at the Meeting and (ii) separate proxies to represent respectively the number of the shares held by the Member that is specified in their instruments of appointment of proxies. If a Member appoints more than one proxy, the proxies so appointed are not entitled to vote on the resolution on a show of hands. Form of proxy must be lodged at the registered office of the Company at 15/F, Miramar Tower, 132 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong not less than 48 hours before the time appointed for holding the Meeting. In calculating the periods mentioned for depositing the instrument appointing a proxy, no account is to be taken of any part of a day that is a public holiday. (2) The Register of Members of the Company will be closed from Monday, 9 June 2014 to Wednesday, 11 June 2014, both days inclusive, during which period no requests for transfer of shares will be accepted. In order to determine Members who are entitled to attend and vote at the Meeting, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Registrar of the Company, Computershare Hong Kong Investor Services Limited, at Shops , 17th Floor, Hopewell Centre, 183 Queen s Road East, Wan Chai, Hong Kong no later than 4:30 p.m. on Friday, 6 June (3) The Register of Members of the Company will also be closed from Wednesday, 18 June 2014 to Monday, 23 June 2014, both days inclusive, during which period no requests for transfer of shares will be accepted. In order to qualify for the proposed final dividend for the year, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Registrar of the Company, Computershare Hong Kong Investor Services Limited, at Shops , 17th Floor, Hopewell Centre, 183 Queen s Road East, Wan Chai, Hong Kong no later than 4:30 p.m. on Tuesday, 17 June (4) An explanatory statement containing the information necessary to enable the Members to make an informed decision as to whether to vote for or against Ordinary Resolutions 5(A) to 5(C) as set out in this notice will be sent to Members together with the Company s 2013 Annual Report.

173 170 Corporate Information Board of Directors Executive Directors Dr the Hon. LEE Shau Kee, GBM (Chairman) Mr LEE Ka Shing Mr Richard TANG Yat Sun Mr Colin LAM Ko Yin Mr Eddie LAU Yum Chuen Mr Norman HO Hau Chong Non-Executive Directors Dr Patrick FUNG Yuk Bun Mr Dominic CHENG Ka On Mr Alexander AU Siu Kee Independent Non-Executive Directors Dr David SIN Wai Kin (Vice Chairman) Mr WU King Cheong Dr Timpson CHUNG Shui Ming Mr Howard YEUNG Ping Leung Mr Thomas LIANG Cheung Biu Audit Committee Dr Timpson CHUNG Shui Ming (Committee Chairman) Dr David SIN Wai Kin Mr WU King Cheong Dr Patrick FUNG Yuk Bun Mr Dominic CHENG Ka On Remuneration Committee Dr Timpson CHUNG Shui Ming (Committee Chairman) Dr the Hon. LEE Shau Kee, GBM Dr David SIN Wai Kin Mr Richard TANG Yat Sun Mr WU King Cheong Nomination Committee Dr the Hon. LEE Shau Kee, GBM (Committee Chairman) Dr David SIN Wai Kin Mr LEE Ka Shing Mr WU King Cheong Dr Timpson CHUNG Shui Ming Chief Executive Officer Mr LEE Ka Shing Chief Operations Officer Mr Felix SEE Chi Kwok Chief Financial Officer Mr Allen LIM Kean Kee Joint Company Secretaries Mr Allen LIM Kean Kee Mr Charles CHU Kwok Sun Auditors KPMG Principal Bankers Bank of China (Hong Kong) Limited The Hongkong & Shanghai Banking Corporation Limited The Bank of Tokyo-Mitsubishi UFJ, Ltd. Mizuho Bank, Ltd. China Construction Bank Corporation Share Registrar Computershare Hong Kong Investor Services Limited Shops , 17th Floor, Hopewell Centre, 183 Queen s Road East, Hong Kong Registered Office 15/F, Miramar Tower, 132 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong Share Listing The Stock Exchange of Hong Kong Limited (Stock Code: 71) Website

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